CartOS calculates sales tax automatically using Avalara data, but tax law isn't one-size-fits-all. Some products are tax-exempt in certain states, some categories have reduced rates, and some customers don't pay tax at all. Tax overrides let you handle these special cases.
When you need overrides
You might need tax overrides if you sell:
- Groceries or food items (exempt or reduced rate in many states)
- Clothing (exempt in some states like Pennsylvania and New Jersey)
- Medical supplies or equipment
- Educational materials
- Digital products (taxed differently than physical goods)
- Products with special tax categories
Or if you have:
- Wholesale or reseller customers with exemption certificates
- Tax-exempt organizations (nonprofits, government)
- Products that qualify for tax holidays
Accessing tax overrides
Go to Settings › Taxes › Overrides to manage your tax exceptions. Here you can create rules that modify how tax is calculated for specific products, collections, or customers.
Product-level overrides
Marking products as tax-exempt
The simplest override is marking a product as not taxable. Edit the product, find the Tax section, and uncheck Charge tax on this product.
When unchecked, no sales tax is ever calculated on this product, regardless of destination. Use this for products that are universally exempt—like most digital downloads in many states.
Tax-exempt by state
More commonly, a product is exempt in some states but taxable in others. For this, create a product override:
- Go to Settings › Taxes › Overrides
- Click Add Override
- Select Product Override
- Choose the product or products
- Select the states where this override applies
- Set the rate to 0% for exemption, or enter a specific rate
- Save
For example, if you sell clothing and want it exempt in Pennsylvania:
- Product: All products in "Clothing" collection
- State: Pennsylvania
- Rate: 0%
Collection-based overrides
Instead of selecting individual products, you can apply overrides to entire collections. This is useful when you have a category of products that share the same tax treatment.
Create a collection for your tax-exempt or specially-taxed products (like "Grocery Items" or "Medical Supplies"), then create an override targeting that collection.
Reduced tax rates
Some products aren't exempt but have lower tax rates. Groceries, for instance, might be taxed at 1% instead of the standard 7% in certain states.
To set a reduced rate:
- Create a new override
- Select the products or collection
- Select the applicable states
- Enter the reduced rate (e.g., 1%)
The override rate replaces the standard calculated rate for those products in those states.
Customer exemptions
Tax-exempt customers
Some customers shouldn't be charged tax at all—resellers with exemption certificates, nonprofits, government agencies. Rather than overriding products, you exempt the customer.
To mark a customer as tax-exempt:
- Go to Customers and find the customer
- Open their profile
- In the Tax Settings section, enable Tax Exempt
- Optionally enter their exemption certificate number for your records
- Save
When a tax-exempt customer checks out while logged in, no tax is applied to their order.
Exemption by state
A customer might have an exemption certificate valid only in certain states. In their tax settings, you can specify which states their exemption applies to. They'll be exempt for orders shipped to those states but charged tax normally for orders to other states.
Managing exemption certificates
While CartOS doesn't store the actual certificate files in customer profiles, you should keep exemption certificates on file externally. In case of audit, you'll need to prove the customer was legitimately exempt.
Best practice: Store certificates in a organized folder (physical or digital) and note the certificate number or date in the customer's CartOS profile for reference.
Override priority
When multiple overrides could apply, CartOS uses this priority order:
- Customer exemption – If the customer is tax-exempt, they pay no tax regardless of product settings
- Product-specific override – A rule targeting a specific product
- Collection-based override – A rule targeting a collection the product belongs to
- Default calculation – Standard Avalara rate for the destination
If a product is in multiple collections with different overrides, the most specific rule wins. When in doubt, test by previewing an order.
Shipping tax overrides
Shipping is taxable in some states and exempt in others. CartOS handles this automatically based on state law, but you can override shipping tax if needed:
- Go to Settings › Taxes › Overrides
- Click Add Override
- Select Shipping Override
- Choose the states
- Set the rate (0% for exempt, or a specific percentage)
Use this if your understanding of shipping taxability differs from the default calculation, but research carefully—shipping tax rules are nuanced.
Creating effective overrides
Be specific
Create overrides only for what actually needs different treatment. Don't override everything "just in case"—you'll create a maintenance nightmare and might charge tax incorrectly.
Document your reasoning
Add notes to your overrides explaining why they exist. "Clothing exempt per PA statute X" is helpful when you're reviewing settings a year later or explaining to your accountant.
Review periodically
Tax law changes. States add or remove exemptions, change rates, or redefine product categories. Review your overrides annually (or when notified of tax law changes) to make sure they're still accurate.
Testing overrides
After creating overrides, test them:
- Add an overridden product to your cart
- Enter a shipping address in the relevant state
- Verify the tax calculation matches your expectation
Test both the override case (should show modified rate) and a non-override case (should show standard rate) to confirm the rule is scoped correctly.
Common override scenarios
Grocery exemption
Create a "Grocery" collection. Add an override: Grocery collection, your nexus states that exempt groceries, rate 0%. Note: grocery definitions vary wildly by state—candy, soda, and prepared food often don't qualify.
Clothing exemption
Create a "Clothing" collection. Add overrides for Pennsylvania (0%), New Jersey (0%), and other states with clothing exemptions. Note: some states exempt only clothing under a certain price threshold.
Digital products
Digital products have complex, varying taxation. Some states tax them like physical goods, some exempt them entirely, some tax only certain types. If your standard tax setup doesn't match your understanding of digital tax law, create overrides for your digital products by state.
Reseller customers
When a business buys your products to resell, they typically provide an exemption certificate. Mark them as tax-exempt in their customer profile. They buy tax-free; they collect tax when they resell to end consumers.
Limitations of overrides
CartOS overrides are powerful but not infinitely flexible:
- Overrides work at the state level, not county or city level
- You can't create conditional overrides based on quantity or order total
- Tax holiday automation requires manual setup before and cleanup after
For highly complex tax scenarios—multiple nexus types, product-specific tax codes at the jurisdiction level, marketplace facilitator rules—consider integrating a dedicated tax service through the Bolt Store. These services specialize in tax complexity and can handle edge cases that basic overrides can't.
Tax holiday overrides
Some states have tax holidays—periods when certain products are tax-free. Back-to-school weekends often exempt clothing and school supplies, for example.
To handle tax holidays:
- Create overrides for the exempt product categories and states
- Note the holiday dates in the override description
- Remove or disable the overrides when the holiday ends
This is manual, so set calendar reminders to enable and disable tax holiday overrides at the right times.
Important disclaimer
CartOS provides tools to help you configure tax collection, but we're not tax advisors. Tax law is complex, varies by jurisdiction, and changes frequently.
Before creating overrides, research the actual tax rules that apply to your products in your nexus states. When in doubt, consult a tax professional. Incorrect tax collection—whether too much or too little—creates problems for you and your customers.
See Basic Tax Settings for an overview of CartOS tax functionality and our general disclaimer about tax data accuracy.