In the modern days, every web-commerce website would like to have updated tax and shipping changes available to their website. It is important to note that tax is not revenue that the seller gets to keep. The seller is simply collecting the tax as part of their agreement to do business in that city or state.

Every month or quarter, the seller prepares forms and payout the money they collected for taxes to the state or local government. So, it is very important that tax and shipping charges are calculated and applied correctly.

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Challenges in determining tax and shipping

Due to certain factors, it is not easy to determine these components. Let us dive in to see what makes things complex here. Let us first explore the tax computation. In the United States itself, the taxes are levied at federal, state and county levels.

California for instance, has the most complicated taxation rules.  Moreover, there could be customers which are tax exempt. this can present a challenge because some US states require that retailers charge sales tax on shipping charges, while other states do not.

Computing shipping charges can be more complex since it not only varies as per destination address, but also weight and priority of the consignment. Some customers may or may not allow partial deliveries. Also for wholesale business,  the organization may give some discounts for ordering in certain shipping logistical units like pallets, cartons, half truck load and full truck load.

Tax determination extensions – There are some extensions available in market which might help you to a great (not 100 %) with tax determination. Some of the popular extensions are Avatax and TaxJar. Look the how AvaTax combines with Magento 2.0 for tax computation.


Shipping extensions – Shipping extensions can make work easier for online retailers and can help solve most obvious problems and help them minimize their shipping costs. Discover Postcode extension works with Shopify to address shipping computation.

Limitations of using Tax and Shipping extensions 

These extensions can help address business situations to an extension.  It cannot compute complex situations with varying business needs. Such situation may also impact performance of the e-commerce store.

Large enterprise already have these situations handled within their ERP system. By efficient integration of ERP with web-commerce, it not only solves current problem, but also keep both the system arrive at the same numbers in future. Let us look at how this works when using Magento as the e-Commerce platform and SAP as the ERP solution.

Discover how to start taking credit card orders within SAP.

Tax and Shipping determination – Solution

We can achieve tax and shipping with real time simulation. It is a process where we can call a particular action based on the business request. In our case, a real time call will be triggered from web-commerce website to SAP and get the updated price for tax and shipping. The below video shows how this information is pulled on a real time basis.



The above solution helps reduce any burden on web-commerce solution as far  calculating tax and shipping is concerned. Also the seller don’t have to worry about maintaining tax and shipping rates at two places. As long as the rates are maintained within ERP, it will automatically apply within the web-store.

Further Consideration

We have to take some consideration while implementing the real time simulation as it may not always be the optimum solution in every case. Below are some learning from our previous experience.

Wise use of real time simulation

We cannot use request the real time call at every page. It will slow down the process. So, we have to use it wisely. Hence always try to minimize to and fro data exchange and maximize the information you need in a single call rather than breaking into multiple ones.

Packet size

We have to ensure that packet size for sending/receiving process is not big. Bigger packet take take some time to be transferred over network and being processed.

I believe with the above insight, you will be able to select your tax and shipping rate integration strategy.

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