Charge tax on shipping in Shopify
Shipping tax is tax charged on the cost of transporting products, rather than on the cost of the products themselves. Whether tax should be charged on shipping varies between countries and tax jurisdictions, and Shopify gives you one setting for it, plus a proportional calculation when an order mixes taxable and exempt items.
Written · Shopify admin, desktop steps · 5 minutes read
The worked example
| Order | $96.00 of products, $12.00 shipping |
| Rate | 13% HST |
| Tax on products | $12.48 |
| Tax on shipping | $1.56 |
| Total with shipping tax | $122.04 |
| Total without shipping tax | $120.48 |
Download the record: shipping-tax-check.csv (229 bytes).
A check sheet for the orders in this tutorial, with the tax on products, the tax on shipping, and the order total for each. The proportional row uses the 75% split from the Canadian example.
1Open Taxes and duties
From your Shopify admin, go to Settings > Taxes and duties. The shipping tax setting is a global setting, so it applies wherever tax is not calculated automatically.
2Turn on Charge tax on shipping rates
In the Global settings section, select Charge tax on shipping rates. Click Save. In the countries and regions where tax is calculated automatically, shipping is taxed where applicable regardless of this setting.
3Check the total on an order
Open an order and read the tax lines. On a $96.00 order with $12.00 shipping at 13% HST, the tax on the products is $12.48 and the tax on the shipping is $1.56, for a total of $122.04. With the setting off, the same order totals $120.48.
4Check a mixed order
If an order contains both exempt and taxable products, the tax on shipping is calculated proportionally. If 1 of 4 items is exempt, shipping is taxed at 75% of the full rate. On the same order that is tax of $1.17 on the $12.00 shipping, for a total of $121.65.
5Use an override where one region differs
If one region taxes shipping differently from the rest, do not change the global setting for it. Set a shipping tax override for that region instead, so the rest of the store keeps the usual behaviour.
The arithmetic
The proportional example is the one on Shopify's Canadian tax page: 1 of 4 items exempt means shipping is taxed at 75% of the full rate:
| Order | Tax on products | Tax on shipping | Customer pays |
|---|---|---|---|
| $96.00 + $12.00 shipping, taxed | $12.48 | $1.56 | $122.04 |
| $96.00 + $12.00 shipping, not taxed | $12.48 | $0.00 | $120.48 |
| $96.00 + $12.00 shipping, 1 of 4 exempt | $12.48 | $1.17 | $121.65 |
The proportional tax on shipping is $12.00 × 13% × 75%, which is $1.17. If no items in the cart are exempt, shipping is taxed at the full rate. If all items in the cart are exempt, no tax is charged on shipping.
Held at the counter
The setting only matters where tax is not automatic. The Charge tax on shipping rates setting affects only those countries and regions where tax is not automatically calculated. Where Shopify calculates tax automatically, shipping is taxed where applicable regardless of this setting, so flipping the switch changes nothing there.
A product override kills the proportional split for that product. If you set a product override, then Shopify Tax will not apply proportional shipping tax to those products. The override takes the product out of the proportional calculation entirely.
Free items are not automatically non-taxable. Free items are not automatically non-taxable. If you ship a free item that should be tax-exempt, you need to change its tax settings on the product variant page, or it counts as taxable in the proportional split.
Sources
- Shipping tax — Shopify's help pages: the Charge tax on shipping rates setting, the note that it only affects regions without automatic calculation, and the proportional shipping tax rules.
- Manage your Canadian taxes — Shopify's help pages: the proportional shipping tax examples, including 1 of 4 items exempt meaning 75% of the full rate.