Managing your Canadian taxes
After you update your store to use the new Canadian tax features, you can manage your tax settings, including your registrations, overrides, and customer exemptions.
Manage the regions in which you're registered
You can edit your registrations at any time to add, delete, or change your registrations or account numbers.
- Go to Settings > Taxes.
- In the Tax regions section, beside Canada, click Set up or click Edit.
- In the Registered tax accounts section, click Add tax account or click Manage.
- Update your regions and account numbers.
- Click Save.
Canadian tax override requirements
You can override the taxes that Shopify sets, but be aware of the following restrictions:
- Overrides to Canada apply only to the GST in British Columbia, Manitoba, Saskatchewan, and Quebec.
- Overrides to New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and PEI tax rates apply only to their corresponding HST rates.
- Overrides to British Columbia, Manitoba, Saskatchewan, and Quebec tax rates apply only to their corresponding PST, RST, or QST rates.
- Alberta, Northwest Territories, Yukon, and Nunavut have no tax, so overrides can't be applied to those regions.
Overrides are also affected by your registrations:
- For overrides to apply to Canada GST, you need to add your Canadian GST account.
- For overrides to apply to HST rates in New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, or PEI, you need to add your Canadian GST account.
- For overrides to apply to the Manitoba RST rate, you need to add your Manitoba account.
- For overrides to apply to the British Columbia PST rate, you need to add your British Columbia account.
- For overrides to apply to the Saskatchewan PST rate, you need to add your Saskatchewan account.
- For overrides to apply to the Quebec QST rate, you need to add your Quebec account.
Sometimes the default tax rates don't apply to certain products. For example, certain types of children's clothing might be exempt from tax or have a lower tax rate. If the default rates don't apply, then you need to create an override.
Creating an override is a two-step process. You first create a manual collection that includes the products that have a different tax rate. Then you specify in what region the override applies and its rate.
For details on collections, refer to Collections.
Create a collection:
- From your Shopify admin, go to Products > Collections.
- Click Create collection, and then enter a name for it.
- Under Collection type, select Manual
- Click Save collection.
Create the override:
- Go to Settings > Taxes.
- In the Tax regions section, click Edit beside Canada.
- In the Tax overrides section, click Add tax override.
- Select the collection.
- Select the region in which the override applies.
- Enter the tax rate for the collection in that region.
- Click Save.
Manage your tax exemptions
As well as setting up a customer to be exempt from all tax, you can exempt a customer from specific Canadian taxes. You can change a customer's exemption settings in your Shopify admin on the customer's profile. Refer to Setting Canadian tax exemptions for more information.
Manage your tax calculations
You can manage various settings that determine how tax is calculated on your products. For example, you can set whether taxes are included in your prices, whether to charge VAT on digital goods, and whether to apply tax to shipping costs. You manage these settings on the Taxes settings page. Refer to Tax overrides and exemptions to learn more.
Go to Settings > Taxes.
In the Tax calculations section, select the options that apply.
Historically, tax amounts were rounded at the invoice level. This means that that the total tax value was calculated by adding the prices of every item in an order, applying the tax rate to the order's subtotal, and rounding the result.
After you've updated your store to use the new Canadian sales tax features, tax amounts are rounded at the line-item level instead. This means that the total tax value is calculated by applying the tax rate to each line in the order, rounding the result, and then adding these subtotals together to arrive at the total value of the order.
The reason this change has been made is that line-level rounding helps to accommodate for different tax rates, or a mix of taxable and non-taxable products.
As an example, let's say that your customer makes an order containing 42 different items, each of which have a price of $14.99 and are subject to 13% HST. The line item tax for each product is determined by multiplying the price (14.99) by the tax rate (0.13), for a result of 1.9487.
The historical method of rounding this result would be to add together each line item tax result and round the total. In this case, this would be a total of 81.8454, which is then rounded to the final tax total of $81.85.
Shopify now rounds tax amounts at the line-item level, so in this case the tax amount is rounded for every product individually. The result of 1.9487 is rounded to $1.95, which is then added together to get the total. In this case, the tax total would be $81.90.