Manage your US taxes

After you've set up your taxes, you can manage your tax settings, including your registrations, overrides, and customer exemptions.

Manage the regions in which you're registered

You can add, delete, or change your registrations or account numbers at any time.

Steps:

  1. From your Shopify admin, go to Settings > Taxes and duties.
  2. In the Manage sales tax collection section, click United States.
  3. In the Regions you're collecting in section, do either of the following:
    1. To set up a new tax registration, click Collect sales tax.
    2. To edit an existing tax registration, click the ... button next to the region you want to edit.
  4. Update your regions and account numbers.
  5. Click Collect sales tax.

Override taxes

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.

Create a product tax override

You can create a tax override for your products if the default tax rules that use product categories don't apply. Creating an override for products is a two-step process. First, you create a collection that includes the products that have a different tax rate. Then you specify to which region the override applies, and the tax rate to use.

For details on collections, refer to Collections.

Steps:

  1. Create a collection:

    1. From your Shopify admin, go to Products > Collections.
    2. Click Create collection, and then enter a name for it.
    3. Under Collection type, select Manual
    4. Click Save collection.
  2. Create the override:

    1. Go to Settings > Taxes and duties.
    2. In the Manage sales tax collection section, click United States.
    3. In the Tax rates and exemptions section, click Add product override.
    4. Select the collection.
    5. Select the region where the override applies.
    6. Enter the tax rate for the collection in that region.
    7. Click Save.

Product categories

Product categories are labels that are assigned to products or to collections of products. For merchants that sell to customers in the United States, they indicate the tax obligations and exemptions that customers have when they purchase those particular products.

Using product categories increases the accuracy of US tax calculations, and reduces the need for tax overrides. Product categories are selected from the Shopify Product Taxonomy, which is a predefined and standardized list. To learn more, refer to Product categories.

If you set a product category for a product that has an override in place, then the override takes precedence over product category tax calculations. Consider removing any product tax overrides that conflict with your product categories. However, if you're aware of tax rules that aren't calculated by product categories, then keep your product tax overrides.

Create a shipping tax override

Taxes on shipping charges can also be overridden. This will take effect regardless of whether you have a tax policy in place on your Taxes and duties page.

Steps

  1. Go to Settings > Taxes and duties.
  2. In the Manage sales tax collection section, click United States.
  3. In the Tax rates and exemptions section, click Add shipping override.
  4. Select the region where the override applies.
  5. Enter the tax rate for shipping in that region.
  6. Click Save.

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 and duties settings page. Refer to Tax overrides and exemptions to learn more.

Steps:

  1. Go to Settings > Taxes and duties.
  2. In the Decide how tax is charged section, select the options that apply.

Tax rounding

Previously, taxes were rounded at the invoice level by calculating the taxes on the order's subtotal, and then rounding the results. After you update your settings to use US tax features, tax amounts are rounded at the line-item level. In this case, 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.

Rounding taxes at the line level improves the calculation of different tax rates and makes it easier to calculate taxes for orders that include taxable and non-taxable products.

Example of tax rounding at the invoice level and at the line-item level

A customer places an order for 42 different items, each with a price of $14.99 and are subject to 13% tax. 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.

Previously, the tax of each line item was added together, and the total was rounded. In this case, the added total was $81.8454, which was rounded to $81.85.

Tax is now rounded at the line-item level, which means the tax amount is rounded for every product individually. The line-item tax amount of $1.9487 is rounded to $1.95, which is then added together to get the total. In this case, the tax total is $81.90.

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