Tax overrides and exemptions

Although Shopify automatically calculates most taxes, you can override tax rates to control how much tax you charge for a particular product, and to handle exceptions and exemptions. You can also specify unique tax rates for shipping destinations or to tax-exempt customers.

For example, you can specify overrides for:

  • state tax exemptions in the United States
  • provincial tax exemptions in Canada
  • VAT exemptions in the United Kingdom.

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

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Set a product to be exempt from sales tax

If you have just a few products that are exempt from tax, then you can prevent any taxes from applying to these products individually:

  1. In your Shopify admin, click Products, and then click the name of the product.

  2. In the Pricing section, uncheck Charge taxes on this product.

  3. Click Save.

Create a collection for products that need a tax override

To apply a tax override, you first need to group the tax-modified products in a specific collection. To create a collection of products for which you want to specify a tax override:

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

    Click Products then Collections

  2. Click Add collection, and then enter a name for it.

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

    Add tax override 2

    Note

    A hidden collection will not be visible to customers in your store, but you can still use it to make your tax override work. Any products placed in this collection (hidden or not), will become tax exempt everywhere in your store.

  4. Click Save collection.

Apply a tax override to a collection or to a shipping region

You can specify unique tax rates for a distinct collection of products or for special shipping regions. For regions in the United States, the regions are specific to counties and cities.

The percentage value that you enter is the amount that will be collected. It's not the amount exempted.

To apply a tax override:

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

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

    Taxov 2
  3. To add an override for products, click Products in the Add Tax Override for country dialog:

    Taxov 3
    1. Click Select a collection, and select the collection that needs an override:

      Add tax override 3

    2. Under Location, select where you want the override to apply.

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

      Add tax override 4
    4. Click Add Override.

  4. To add an override for a shipping region, click Shipping in the Add Tax Override for country dialog.

    1. Under Location, select where you want the override to apply.
    2. Under Tax rate, enter the amount of tax that you want to charge for the products in the collection:

      Add tax override 4
    3. Click Add Override.

  5. In the Tax overrides section, either check the Applies to all counties and cities box, or check the sub-region and specify overrides at the county and city level:

    Add tax override 5
  6. Click Save.

Setting up tax-exempt customers

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

Tax exempt customers are not charged any tax when they complete a checkout. These customers need to check out using the same email address as the one listed on their customer account.

To set a customer as tax exempt:

  1. From your Shopify admin, click Customers (or press G C):

    Customers

  2. Find the customer you want to exempt from all taxes, and then click their name.

  3. In the Customer overview section, check Customer is tax exempt.

  4. Click Save.

New York, Massachusetts, and Rhode Island clothing rules

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

  • New York: 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 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.
  • Rhode Island: Clothing and footwear products with an individual price of $250 or less are exempt from sales tax, and only the incremental amount above $250 is subject to sales tax. For example, if a suit costs $275, then the tax applies only to $25.

For Shopify to apply the built-in tax override automatically, your store must have a physical presence in the state, 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 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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