The store app lets you setup taxes to charge certain customers when they checkout. A common scenario would be to charge a sales tax to orders shipped to the same state/province that your business is located in. Typically, taxes are charged to customers that are shipping their products to a certain location. The store app will use the shipping country and shipping state/province to determine which tax rate to use, if any.
There are a few parts involved in setting up tax rates.
Product Tax Classes
Product Tax Classes are used to organize taxes so that some products can be setup to use a different tax rate. A typical scenario would be if you were selling gift certificates then you would want those products to not be taxable but you would want your other products to be taxable. If you don't need some products to be non-taxable and you don't need to charge different tax rates for certain products then you can just leave the Product Tax Class settings at their default value.
Customer Tax Classes
Customer Tax Classes are similar to product tax classes except that they apply to customers instead of products. Right now they are still in development and not functionally complete.
Tax Rates are where you setup the actual rate, and what country, state/province, Product Tax Class and Customer Tax Class that it applies to.
Setting up Non-Taxable Products
Some stores sell products that should not have any sales tax applied to it. An example product would be a gift certificate. We've setup a short guide on how to setup non-taxable products.