We can set easily Tax in Magento, for that we need to set Customer tax Class, Product Tax Class and Tax Rate. Appropriate Tax will calculate by considering the customer tax class, product tax class, tax rate, shipping address, billing address.\r\nProcess of Tax Setting\r\n\r\nCreation of Customer Tax\r\nGo to Sales->Tax->Customer Tax Classes\r\n\r\nFor creating new Customer Tax class click on Add new tab as shown in screenshot.\r\n\r\nGive name to your Customer tax class.\r\n\r\nAfter that click on Save Class tab to save your customer tax class.\r\nCreation of Product Tax Class\r\nSales->Tax->Product Tax Classes\r\n\r\nTo add new Product tax class click on Add new\r\n\r\nEnter name for your Product tax class\r\n\r\nTaxable Goods is the our new Product Tax Class name.\r\nThen click on Save class tab to save product tax class.\r\nManage Tax Rates\r\nSales->Tax->Manage tax zones and rates\r\n\r\nClick on Add new tax rate, and fill the all required information.\r\n\r\n\r\n\r\nTax Identifier:\r\n It is the name of your newly created Tax rate. Do not use space while giving name.\r\nCountry: \r\nSelect country from drop-down to which you want to set the rate.\r\nState: \r\nSet State where the tax applies. By default this option is not set, it indicated by Asterisk(*)\r\nPost Code: \r\nSet Post Code where the tax applies. By default it is not set. It indicated by Asterisk(*)\r\nRate Percent: \r\nEnter the value of tax rate that you want to set to your rule.\r\n\r\nThen click on Save Rate\r\n\r\nManage tax rules\r\nSales->Tax->Manage tax rules\r\n\r\nClick on tab Add new Tax Rule\r\n\r\n\r\nFill all information required to set up rule\r\n\r\nName: \r\nName of your rule\r\nCustomer Tax Class:\r\nSelect customer tax class to which you want to apply rule.\r\nProduct Tax Class:\r\nSelect product tax class to which you want to apply. You can select one or to apply entire group.\r\n\r\nTax Rate:\r\nSelect tax rate that you want to apply to this rule\r\nPriority: \r\nSet priority to your rules. When we applied two or three rules then rule will apply by considering priority. Rule with lowest priority get applied first then of highest priority\r\nSort Order:\r\nIt specify the order in which rule will be displayed on the Manage Tax Rule page\r\n\r\nAfter that Click on Save Rule\r\nNow we can apply it to product. From System->Configuration->Tax\r\n\r\nSave Configuration\r\nGo to catalog->Manage Product\r\n\r\nFrom General Setting set tax class, to which you want to apply tax rule, then Save product\r\n\r\nTax displayed at Shopping cart. As stated earlier, we have set tax for US is 15% . It calculate tax on Total.