Shipping tax is tax that's charged on the cost of transporting products, rather than the cost of the products themselves. Whether tax should be charged on shipping varies between different countries and tax jurisdictions.
Charge tax on shipping rates
If you need to charge taxes on your shipping rates, then you can change this setting in your Shopify admin.
The Charge tax on shipping rates setting affects only those countries and regions where tax is not automatically calculated. In the following countries and regions, shipping is taxed where applicable regardless of this setting:
- the European Union
- New Zealand
- the United Kingdom
- the United States
- From your Shopify admin, go to Settings > Taxes and duties.
- In the Decide how tax is charged section, select Charge tax on shipping rates.
- Click Save.
Proportional shipping tax
Proportional shipping tax is a calculation that affects the amount of tax charged on shipping when some items in the order are non-taxable. There are a few different ways that proportional shipping tax can be calculated. Which rules apply to you depends on the tax legislation for the country or region in which your store is located and the tax legislation of the country or region that you ship to. If you're not sure how proportional shipping tax should be calculated for orders that you ship, then refer to a tax professional.
- Proportional tax by quantity: This method of calculating proportional shipping tax is based on the number of items in the order that are non-taxable. For example, you ship an order containing 10 items. Of those items, four are non-taxable. Tax is calculated at 60% of the tax that would ordinarily be charged for shipping.
- Proportional tax by price: This method of calculating proportional shipping tax is based on the proportion of the total price that's taxable. For example, you ship an order containing two items. One product has a price of 5 USD and the other has a price of 10 USD. The 10 USD product is non-taxable, so tax is calculated at 33% of the tax that would ordinarily be charged for shipping.
- Shipping exempt based on order: In countries and regions that use this method, tax on shipping is not charged when all items in the order are tax-exempt.