To add a new 'Custom Tax Rate', first click 'Settings' in the top right hand corner.
On the left hand side menu, click the 'Misc' tab and then 'Tax Rates' in the drop down menu.
You will see the screen below. To add a new 'Tax Rate', click the green '+ New Tax Class' button.
Fill out the 'Tax Class Name' (e.g. Pens and Paper) and the 'Tax Rate'. Click the 'Save' button once completed.
Note: You can assign new Tax Classes to your products on the 'Products' page.