Tax overrides and exemptions

Shopify automatically calculates most taxes. If you have a unique local tax law, then you might want to set up a manual tax override. Tax overrides give you full control over how much tax you charge for each product when you need to make exceptions. We recommend that merchants use tax overrides for things like:

  • state tax exemptions in the United States
  • provincial tax exemptions in Canada
  • VAT exemptions in the United Kingdom
  • partial overrides or full exemptions for any region.

To set up a tax override, create a collection for the products that are tax exempt, and then apply the override to that collection.

Grow your business

Sufio can help you set up your store to follow EU VAT regulations, including everything from capturing and validating your business customers' EU VAT registration numbers and setting them as tax exempt when applicable, to creating invoices that are fully compliant in Canada and the countries of the European Union. Sufio offers an exclusive plan for Shopify stores. Business customers with valid VAT numbers are not charged VAT during checkout.

Create a new collection for tax-modified products

Applying tax overrides requires that you group the tax-modified products in a specific collection. To create a collection of products for which you want to override taxes:

  1. From your Shopify admin, click Products, then click Collections (or press G P C):

    Click Products then Collections

  2. Click Add collection and enter a name that suits your business, for example:

    Add tax override 1
  3. If you want to hide the collection on any of your active sales channels, uncheck the channel in the Visibility section:

    Add tax override 2
  4. Click Save collection.

Note

A hidden collection will not appear in your storefront, but you can still use it to make your tax override work. Anything placed in this collection (hidden or not), will become tax exempt everywhere in your store.

Apply a tax override to a collection

To apply the tax override to your collection:

  1. From your Shopify admin, click Settings, and then click Taxes.

  2. Click the name of the country to which you want to add the tax override:

    Taxov 1
  3. Scroll to the Tax Overrides section, and click Add a tax override:

    Taxov 2
  4. Add a tax override for Products:

    Taxov 3
  5. Click Select a collection, and click the collection that needs an override:

    Add tax override 3
  6. Under Location, select where you want to specify an override for (state, county, city).

  7. Under Tax rate, enter the amount of tax that you want to charge for the products in the collection:

    Add tax override 4
  8. Click Add Override.

  9. When the override is created, you can configure county- and city-specific overrides. To make sure that no tax is charged to customers from different cities and counties in your state or province, check the Applies to all counties and cities box:

    Add tax override 5
  10. Click Save:

    Add tax override 6

The amount in the Tax rate boxes is the percentage that will be collected for products in this collection. It's not the amount exempted. In the example above, all taxes are exempted and no tax will be collected for the products within the College textbooks for students collection.

Note

If you need to create an override for shipping rates, select shipping on the Add Tax Override menu.

Tax exempt customers

On the Customers page of your Shopify admin, you can set a customer to be fully tax exempt.

Grow your business

Sufio can help you set up your store to follow EU VAT regulations, including everything from capturing and validating your business customers' EU VAT registration numbers and setting them as tax exempt when applicable, to creating invoices that are fully compliant in Canada and the countries of the European Union. Sufio offers an exclusive plan for Shopify stores. Business customers with valid VAT numbers are not charged VAT during checkout.

New York and Massachusetts clothing rules

Shopify has built-in tax overrides for clothing products for the states of New York and Massachusetts. The tax exemptions for clothing products within those states are:

  • New York clothing rule: Clothing products, footwear products, and items used to repair clothing products with an individual price under $110 are exempt from sales tax. For example, two items with a combined price of $200 will each be exempt from sales tax, but one item with an individual price of $110 will be subject to sales tax.
  • Massachusetts clothing rule: Clothing products with a price under $175 are exempt from sales tax, and clothing products with a price of over $175 will collect tax only on the amount that their price is over $175. For example, an item of clothing with a price of $200 will be taxed on $25 because the first $175 is not taxable.

For Shopify to apply the built-in tax override automatically, your store must have a physical presence in either New York or Massachusetts, and you must create a collection with a title of tax:clothing for the products that are tax exempt.

To create a tax:clothing collection:

  1. From your Shopify admin, click Products, then click Collections (or press G P C):

    Click Products then Collections

  2. Create a collection and give it the title tax:clothing:

    Add tax override 7
  3. If you want to hide the collection on any of your active sales channels, uncheck the channel in the Visibility section:

    Add tax override 8
  4. Click Save collection.

After saving the tax:clothing collection, the applicable New York or Massachusetts clothing rule will be applied automatically, and the correct amount of tax will be collected for the products in that collection.

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