Managing your US taxes

After you update your store to use the new US 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.

Steps:

  1. Go to Settings > Taxes.
  2. In the Tax regions section, beside United States, click Set up or click Edit.
  3. In the Tax registrations section, click Add tax registration or click the ... button next to the region you want to edit.
  4. Update your regions and account numbers.
  5. Click Save.

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

Creating an override for products is a two-step process. You first create a 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.

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.
    2. In the Tax regions section, click Edit beside United States.
    3. In the Tax overrides section, click Add a 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.

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 page.

Steps

  1. Go to Settings > Taxes.
  2. In the Tax regions section, click Edit beside United States.
  3. In the Tax overrides section, click Add a 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 settings page. Refer to Tax overrides and exemptions to learn more.

Steps:

  1. Go to Settings > Taxes.
  2. In the Tax calculations section, select the options that apply.

Tax rounding

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 settings to use the new US 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.

Example

Suppose 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.

Historically, the tax of each line item would be added together, and the total would be rounded. In this example, the added total would be $81.8454, which would round to $81.85.

Shopify now rounds tax amounts 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 would be $81.90.

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