Disclaimer: Treez Support can explain how tax configurations work within the Treez platform, but cannot create, edit, or manage tax settings on your behalf. Customers are responsible for ensuring their tax configurations are accurate and compliant with applicable tax laws. Treez is not liable for tax calculations, filings, penalties, or compliance issues. For guidance beyond this documentation, consult a qualified CPA or tax professional.
Overview
While tax rates and regulations vary by location, most tax setups in Treez follow a small number of common structural patterns. These patterns describe how taxes are grouped into layers and how they compound during checkout.
This article provides visual examples of the most common tax configuration patterns to help you validate your setup and understand how your taxes are being calculated.
This article focuses on structure and behavior, not exact rates or state-specific requirements.
For a full explanation of how tax calculation works in Treez, see How Taxes Work in Treez.
For step-by-step setup instructions, see Configuring POS Tax Layers.
Pattern 1: Multiple Non-Compounding Taxes on the Subtotal
When to use this configuration:
Use this pattern when multiple cannabis taxes must be calculated directly from the subtotal and must not compound with each other, while non-cannabis products are still subject to sales tax.
This is common for:
Multiple local cannabis taxes
Taxes that explicitly exclude other taxes from their calculation base
In this example, a $100 cannabis product is subject to a 10% local cannabis tax, a 15% cannabis excise tax, and a 5% sales tax. Because all three taxes are configured in the same layer, each tax is calculated independently from the original $100 price. The combined taxes total $30, resulting in a final order total of $130.
How it works:
Taxes calculate from the same base amount
Tax do not affect the other’s calculation
No additional layers are required
Example Calculation with Non-Cannabis:
Order contains:
$80.00 cannabis
$20.00 non-cannabis
Original subtotal = $100.00
Layer 1
Local cannabis tax (10% of $80.00) = $8.00
Cannabis excise tax (15% of $80.00) = $12.00
Sales tax (5% of $100.00) = $5.00
Total taxes in Layer 1 = $25.00
Final total = $125.00
Pattern 2: Excise Cannabis Tax with Sales Tax on Everything
When to use this configuration:
Use this pattern when cannabis excise tax must be calculated first, and sales tax must be calculated on the total price including excise. Sales tax applies to both cannabis and non-cannabis products (merch and accessories).
This pattern is common in states where:
Excise tax is required on cannabis products, and
Sales tax is calculated on the excise-included total
In this example, a $100 cannabis product is first subject to a 15% cannabis excise tax, increasing the taxable amount to $115. Sales tax at 5% is then applied to the excise-included total. Because sales tax is calculated in a separate layer below excise, the taxes compound, resulting in a final order total of $120.75.
How it works
Layer 1 calculates excise tax only on cannabis products
The excise amount is added to the subtotal
Layer 2 calculates sales tax on the new total
Sales tax applies to:
cannabis products, and
non-cannabis products (merch, accessories, etc.)
Because sales tax is calculated after excise, the taxes compound.
Example Calculation with Non-Cannabis:
Order contains:
$80.00 cannabis
$20.00 non-cannabis
Original subtotal = $100.00
Layer 1
Cannabis excise tax (15% of $80.00) = $12.00
Subtotal after Layer 1 = $112.00
Layer 2
Sales tax (5% of $112.00) = $5.60
Final total = $117.60
Pattern 3: Compounding Local or City Taxes
When to use this configuration:
Use this pattern when a local or city cannabis tax must be calculated first, a state or primary cannabis excise tax must then be calculated on top of that local tax, and sales tax must be calculated last on the combined total.
This configuration is typically required in jurisdictions where cannabis taxes explicitly compound across multiple layers and each tax is included in the taxable base for the next.
This is common for:
Local cannabis taxes should be included in the excise tax base
Jurisdictions with fully compounding “tax on tax on tax” requirements
In this scenario, a $100 cannabis product is subject to both a 15% cannabis excise tax and a 10% local cannabis tax in the same layer. These cannabis taxes are included in the taxable base, bringing the subtotal to $125. Sales tax at 5% is then calculated in a separate layer below, compounding on the excise- and local-tax-included total. This results in a final order total of $131.25.
How it works
Local cannabis taxes are calculated first and added to the subtotal
Cannabis excise tax is calculated in a separate layer on the local-tax-included amount
Sales tax is calculated in a final layer and compounds on all prior taxes
The Applies To setting determines which products each tax applies to at each layer
Example calculation:
Order contains:
$80.00 cannabis
$20.00 non-cannabis
Original subtotal = $100.00
Layer 1
Local cannabis tax (10% of $80.00) = $8.00
Subtotal after Layer 1 = $108.00
Layer 2
Cannabis excise tax (15% of $108.00*) = $16.20
Subtotal after Layer 2 = $124.20
Layer 3
Sales tax (5% of $124.20) = $6.21
Final total = $130.41
Pattern 4: Subtype-Based Cannabis Taxes
When to use this configuration:
Use this pattern when different cannabis product subtypes require different tax rates.
This is common in markets with:
THC-based excise taxes
Category-specific cannabis taxes
How it works
All subtype-based taxes can exist in the same layer
Each tax applies only to the subtypes it is configured for
Taxes do not compound with each other
In this example, multiple cannabis excise, county, local, and sales taxes are configured in the same layer and apply to different product subtypes as defined in the “Applies To Products” column. Because all taxes exist within a single layer, each tax is calculated independently from its own applicable base and does not compound with other taxes. The individual tax amounts are then added together, resulting in a final order total of $190.50.
For a detailed example of this pattern, see the Illinois Tax Configuration Guide.
How to choose the right pattern
Start with these questions:
Do any cannabis taxes need to calculate on top of other cannabis taxes?
If no → use a non-compounding pattern
If yes → use a compounding pattern
Does sales tax calculate on top of cannabis taxes?
If yes → sales tax must be in a lower layer
If no → sales tax can live in the same layer
Are different cannabis products taxed at different rates?
If yes → use a subtype-based pattern
When layer order matters
If taxes are in different layers, order matters
If taxes are in the same layer, order does not matter
Moving a tax between layers will change how it calculates
What this article assumes
Tax rates shown are examples only
Your jurisdiction requires sales tax on non-cannabis products
Medical and Adult-Use configurations may differ
You have confirmed tax requirements with a tax professional
Common configuration mistakes
Putting sales tax above cannabis excise tax
Splitting non-compounding taxes into separate layers
Applying excise tax to non-cannabis products
Forgetting to configure both Medical and Adult-Use tabs
Assuming screenshots from another market apply directly
Related documentation