Taxes
Next let's take a look at the settings for taxes. Click on Settings and then Taxes in the navigation panel. In this section you can specify the taxes that are to be charged on orders from each of the countries (and regions) that your store will ship to. There are also a couple of settings relating to how those taxes are applied.
Your online store will come under the tax laws of the country in which your business is registered. Shopify will automatically propose tax rates based on the business address you filled in when you first set up your store, the same one that is listed in the general settings. Ultimately though, it is your responsibility to make sure these are correct so it's essential to verify them with your accountant.
Include taxes in prices
In the taxation settings, below the list of destinations, the first option is a checkbox "Include taxes in prices". Let's take a look at how the tax will be applied in each case using an example of an order for a poster that is sold for $99:
- "Include taxes in prices" checkbox is selected: In this
case, the price that the customer sees in the store is the full
price including tax. The customer will pay $99 plus the relevant
shipping charges for the order.
- "Include taxes in price" checkbox is not selected: In
this case, the price that the customer sees in the store does not
include tax. When the customer goes to the checkout and completes
their address, the relevant tax and shipping charges will be added
to the $99.
Consult your accountant if you are not sure which option to use for your store. Make sure to click the Save changes button to apply any changes you have made.
Charge tax on shipping rates
The second taxation setting relates to tax on shipping charges:
-
"Charge tax on shipping rates" checkbox is selected: In this case, tax will be applied on top of the shipping rate that you specified in the shipping section.
- "Charge tax on shipping rates" checkbox is not selected:
In this case, there is no tax applied to the shipping rate. The
shipping is sold effectively tax free.
Again you may need to consult your accountant to find out if tax needs to be charged on shipping in your country. Click Save changes when you have finished.
Changing the tax rates for particular countries
The countries (or destinations) listed in the taxes section are put in place in the shipping section. If you want to add more countries, you can do so from the shipping settings
To edit the tax rate for a country already listed in the destinations list:
Editing the tax rate for a particular country
- For the destination of your choice, click on the name of the
destination to reveal the tax settings for that
destination.
- Fill in the tax rate as it should be and click the Save
changes button to finish. The page will now show the updated tax
rate.
Some countries, the United States and Spain for example, also have their regions listed in Shopify. For these countries you can specify the tax rates to be applied to individual regions. Shopify will suggest the tax rates to be applied. Verify they are correct for your business.