If you wish to setup Taxes, go to:

Settings -> Billing -> Taxes -> Add Tax

Add/Edit Tax Rule

Name: Insert Tax name, such as "Sales Tax".

* Country: Select which Country this tax will apply to. If every Country should receive the tax rule, select All (Make default).

** Division: Which State or area should this apply to. If the entire Division/State/Area should receive the tax rule, select All (Make default).

Tax (%): Select the percentage of the total price that is taxable.

Level: Select the Level of tax. Why are there 2 levels of tax?
Use VAT: Yes or No. More information on VAT.

* If a tax rule is applied to all countries, it will be the default tax unless otherwise specified.

** If a tax rule is applied to all states, it will be the countries default tax unless otherwise specified.

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