Tax Rules for P&L Estimation

Tax Rules for P&L Estimation

Tax rules in MerchantFlow let you configure tax rates per country, per state or province, or across Europe as a whole, 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 rates, pick how MerchantFlow should treat sales tax in your P&L. The same two options appear on the Tax tab and under Settings > General > Financial Preferences -- it is one setting shown in two places:

• 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 place you sell. MerchantFlow matches each order against your rules using the order's shipping address, calculates an estimated tax amount, and surfaces the total in the daily P&L breakdown -- 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. Three insight tiles at the top show Active Rules, Tax This Period (last 30 days), and your Blended Rate weighted by revenue.

How to Add a Tax Rule

1. Go to Settings > Tax (/dashboard/settings/tax)
2. Click Add Tax Rule
3. Fill in:
   • Country - choose a Single country, or the Europe scope to cover Europe with one rule
   • Tax Label - what the tax is called (GST, VAT, TVA, ...)
   • State/Province (optional) - a 1-3 character region code such as CA or NSW. Leave blank for a country-wide rule. Not available on Europe-wide rules
   • Effective From (optional) - leave blank to apply the rule to all history, or set a date to schedule a rate change
   • Calculation type - Percentage rate or Fixed amount per order
   • Rate (%) or Amount per order + Currency
   • Tax Type - Inclusive (tax in price) or Exclusive (added on top)
4. Click Add Rule

Picking certain countries pre-fills sensible defaults: AU GST 10% inclusive, NZ GST 15% inclusive, GB VAT 20% inclusive, DE VAT 19% inclusive, FR TVA 20% inclusive, CA GST/HST 5% exclusive.

Rate Changes Over Time

Rather than editing a rate in place, add a second rule for the same country with a later Effective From date. Orders are taxed at whichever version was in effect on the order's date, so historical figures stay correct. Rules scheduled for the future show a Scheduled badge.

Country, region, and effective date cannot be changed after a rule is created -- delete and recreate instead. The rate, label, and type can be edited freely.

How a Rule Is Matched to an Order

MerchantFlow reads the order's shipping country and shipping region, then tries in this order and stops at the first hit:

1. An exact country + region rule
2. A country-wide rule for that country
3. The Europe scope rule, if the destination is a European country

Within a match, the most recent version whose Effective From date is on or before the order date wins. Orders with no shipping country are skipped, and there is no global default -- if nothing matches, estimated tax for that order is zero.

How Tax Estimation Works in the P&L

Percentage rules only fill a gap. If your commerce platform already reported tax on an order (anything at or above $0.01), MerchantFlow keeps that figure and does not estimate on top of it. Fixed per-order rules are the exception -- they represent an additional liability, so they apply to every matching order regardless of what the platform reported.

The maths depends on the rule's Tax Type:

Inclusive (tax already in the price):  tax = subtotal x rate / (100 + rate)
Exclusive (tax added on top):          tax = subtotal x rate / 100

Fixed rules add a flat amount per order, converted into your store currency at the exchange rate for that order's date.

The estimated total is folded into the daily tax figure, which surfaces as the Tax column on Profit > Daily Breakdown and as the Tax column in the P&L CSV export. How it affects profit depends on your Sales Tax Treatment:

• If you chose Tax is a cost, a Sales Tax (treated as cost) row is subtracted from net profit on the profit waterfall, and a Sales Tax slice appears in the cost breakdown.
• If you chose Tax is pass-through (default), the tax figure is still reported in the daily breakdown for visibility, but it is not subtracted from contribution margin or net profit and it gets no waterfall row or cost-breakdown slice.

Adding, editing, or deleting a rule queues a background recompute of your P&L snapshots from that rule's effective date forward, so historical figures line up with the change.

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 reported tax on an order, MerchantFlow uses that figure and skips percentage-based estimation. Percentage rules fill in only where the platform reported no tax. Fixed per-order rules are different -- they represent a separate liability and apply on top of whatever the platform reported.

Can I update tax rates retroactively?

Yes. Editing a rule's rate or type queues a background recompute of your P&L snapshots from that rule's effective date onward, so historical figures update to match. If you want a rate change to apply only from a certain date forward, add a second rule with that Effective From date instead of editing the existing one.

How do I handle a country with different rates per state or province?

Add a country-wide rule as the fallback, then add region-specific rules using the State/Province field. A region rule always beats the country rule for orders shipping to that region.

Can one rule cover the whole of Europe?

Yes -- switch the Country control to Europe and set a single rate. It covers roughly 50 European countries including the EU, EEA, UK, and Switzerland. Any exact country or country+region rule you add takes precedence over the Europe-wide rule.

Are tax rules per workspace?

Yes. Tax rules are configured per workspace and apply to all orders in that workspace. The Tax tab is not shown in agency workspaces.

Related Guides

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

Last updated: August 29, 2026