Tax Rules for P&L Estimation

Tax rules in MerchantFlow let you configure per-country tax rates so that your daily P&L calculations include estimated tax as a line item. Whether tax actually reduces profit depends on your Sales Tax Treatment preference, configured separately in Settings > Financial Preferences.

Sales Tax Treatment (Cost vs Pass-Through)

Before you set per-country rates, pick how MerchantFlow should treat sales tax in your P&L:

• Tax is a cost (Yes) - select this when you absorb tax (tax-inclusive pricing, GST/VAT). Estimated tax is deducted from profit in dashboards and reports.
• Tax is pass-through (No, default) - select this when tax is collected from customers and remitted to the government. Tax is excluded from profit math and does not hit your bottom line.

Configure this from Settings > Financial Preferences > Sales Tax Treatment. The setting flows through every profit surface - the dashboard KPIs, P&L pages, North Star history, orders, and the daily email summary - so the same number is shown everywhere.

What Are Tax Rules?

Tax rules define the estimated tax rate for each country where you sell products. MerchantFlow uses these rates to calculate an estimated tax amount for each day's revenue, which is shown in the daily P&L breakdown and is treated as a cost or as pass-through based on your Sales Tax Treatment choice above.

How to Access Tax Rules

Navigate to Settings > Tax (/dashboard/settings/tax) to view, create, and manage tax rules.

How to Add a Tax Rule

1. Go to Settings > Tax (/dashboard/settings/tax)
2. Click "Add Tax Rule"
3. Enter:
   • Country - the country this rule applies to
   • Tax Rate (%) - the estimated tax percentage
   • Description (optional) - notes about the rule
4. Click "Save"

You can add multiple rules for different countries. Each rule applies to revenue attributed to orders from that country.

How Tax Estimation Works in the P&L

When MerchantFlow calculates the daily P&L, it:

1. Groups revenue by order country
2. Applies the matching tax rule rate for each country
3. Sums the estimated tax across all countries
4. Surfaces the total as a Tax (Estimated) line in the P&L breakdown

How that line affects profit depends on your Sales Tax Treatment:

• If you chose Tax is a cost, estimated tax is subtracted between shipping/fulfillment costs and net profit.
• If you chose Tax is pass-through (default), estimated tax is shown for visibility but is not subtracted from contribution margin or net profit.

Taxes Included vs. Excluded

MerchantFlow respects the taxesIncluded flag from your commerce platform:

• Taxes included (common in AU, EU, UK) - tax is already part of the order total. The P&L shows gross revenue including tax, then deducts estimated tax.
• Taxes excluded (common in US, CA) - tax is added on top of the product price. The P&L uses the pre-tax revenue figure.

When to Use Tax Rules

Tax rules are most useful for:

• Stores handling tax outside their commerce platform - when Shopify or WooCommerce does not collect tax data
• Multi-country sellers - different tax rates per market
• P&L accuracy - getting a closer-to-real net profit figure before formal tax filing

Frequently Asked Questions

Do tax rules replace actual tax data from Shopify?

No. If your commerce platform provides tax data on orders, MerchantFlow uses that data directly. Tax rules provide estimates for cases where tax data is not available from the platform.

Can I update tax rates retroactively?

Changing a tax rule applies to future P&L calculations. Historical P&L snapshots retain the rate that was active when they were calculated.

Are tax rules per workspace?

Yes. Tax rules are configured per workspace and apply to all orders in that workspace.

Related Guides

• P&L Overview - how profit and loss is calculated
• Profit Margins - gross, contribution, and net margins
• Expense Tracking - other cost tracking

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Last updated: April 30, 2026