Canadian Tax Rate Errors: Taxes not calculated properly + not being charged on shipping!

[ffiioonnaa]

Hi there,

As some other Canadian retailers will know, we currently have a two month tax exemption on certain products Canada-wide (except some items in Quebec still being charged PST). Everything was working well for us up until this past Friday Dec 20th, and now all of our orders are calculating taxes incorrectly. 

1) Shipping options were not being taxed (both Canada Post and Fedex)

2) HST totals were incorrect on more than one order.

I've tried order combinations for only tax-exempt items, and its very clear in those cases that the tax is not being charged on the shipping fee, which it should be as that is not tax-exempt.

Additionally, on orders that are being tax regularly, we are still not seeing tax charged on shipping.

We also just received an order for 1 item where the invoice says tax was charged at the correct rate, but yet the total comes to the subtotal of the items + shipping rate (no tax) and that is what the customer was charged. 
Ex.

Item 1: $10
Shipping: $10
Subtotal: $20

Taxes (15%): $3.00

Total charged to customer: $20

This is causing all sorts of problems for our statements and we are losing money with every error. Is anyone else experiencing this?? I am waiting for Tax Support to reply but this is an urgent issue for us and I can't imagine we are the only ones.

Also - it should be noted, that despite Shopify saying they would apply the correct tax exemptions automatically across Canada, we still had to create a tax override for books only for Quebec because they not charging tax on books (which previously they would have charged 5% tax on). 

Update: I just found this changelog post from Dec 20th with aligns with when our issues started:https://changelog.shopify.com/posts/charge-tax-on-shipping-proportionally-in-canada-with-shopify

Its incredibly confusing that they are using VAT examples for canadian tax exemptions. This must be related to our issues?? It is not making sense.

Please let me know if you've found any solutions! We would be most grateful. 

Thanks.

[carolynm]

I spent about 45 minutes on Chat with Shopify - no real understanding of the issues (thought I was trying to set up sales tax), and said they would report my findings to their developers.  From my read of CRA, there is no sales tax 'holiday' for shipping.  I have found all sorts of other sales tax calculation errors since December 14.  And I've even found PST added to at least one order where we have never had PST added before and we are not registered in that province.  It's very frustrating.

[ffiioonnaa]

Hey Carolyn,

Sorry to hear that! Sounds very similar to every conversation I was having, and I know they are doing their best to understand the problem it just has so many layers to untangle.

I ended up having to create new shipping tax overrides for all provinces to ensure the sales tax was still added to shipping costs. We also discovered that some of our odd calculations relating to Quebec's PST was because of a stray 5% that shopify was automatically added, so I removed the 5% that I had added and now everything seems to be added up correctly. Its so incredibly complicated! Perhaps try the shipping overrides and see if that helps?
My colleague "created an order" in the back end and that is where we were actually able to visualize the exact tax breakdown that shopify was adding to each individual order. Prior to that we had been guessing based on tests on the front end.

I hope you find a solution!

[Ecomm]

example of the override, percent depends on your fiscal position. this is an example of ontario business that is setup for HST and have to collect the QST in Quebec, but not registered in the other none HST participating provinces.

[SRSM]

Do you have any idea why tax overrides aren't available for the territories?

[carolynm]

no idea - I asked today, as I found another error in their calculation -
there was no Alberta in the drop down either...

[Ecomm]

Missing Default GST Settings for Certain Provinces in Shopify

I’ve noticed an issue with Shopify’s tax settings: the provinces and territories that only charge GST (and not PST or HST) — Alberta, Northwest Territories, Nunavut, and Yukon — don’t seem to be listed as a default option. Instead, Shopify seems to want us to set "Canada" as the default tax setting for these regions.

This approach can be confusing and potentially problematic for businesses trying to ensure accurate tax compliance across all provinces and territories.

For reference, here’s a helpful table from the Retail Council of Canada that lists the three types of sales taxes in Canada (PST, GST, and HST), along with the current rates for each province and territory:
👉Sales Tax Rates by Province - Retail Council of Canada

Has anyone else experienced this issue or found a better way to manage these settings within Shopify?

[SRSM]

Augh ok I added the 5% rate for Canada, but that seems to be overriding all the other provincial overrides. So every province/territory is now only being taxed 5%.

This is so frustrating.

[ffiioonnaa]

Hi, 

Similar to the chart above, this is what I currently have inputted for shipping overrides and its calculating properly. I subtracted the 5% from Quebec and the shipping taxes are now right (see additional notes below). 

I also have 2 sets of active product overrides:

One is for books (had to create a book-only collection to apply this to):

Quebec we had to set to 0% tax override (because they are complying with this for the tax holiday)

QST Only - General Tax Override

Quebec at 9.98%

With these adjustments we seem to be having success with everything adding properly. I hope this helps!

[SRSM]

Correct me if I'm wrong, but I thought BC was supposed to be a total of 12% (5% GST and 7% PST)? And 13% for MB and 11% for SK? Is there a reason you're only charging GST for those provinces?

[ffiioonnaa]

Good question. I am just a dev applying the rules as given to me (so definitely check that its right for your shop), but I believe this is because we are in Ontario so the "place of supply" is Ontario so we don't charge for their (BC's) provincial tax (PST). We just charge the 5% GST. However we are registered for QST in Quebec so we do charge that. Same applies to the other situations. 

Here is some info I found on it:
https://wtcca.com/blog/charging-gst-hst-for-out-of-province-sales-and-foreign-clients/

There is a list below the main text about requirements for you to register for the PST in another province. 

Again, do what makes sense for your individual situation! I am definitely not claiming to be an expert on taxes by any means, just trying to make the shopify system work for us based on how we need the taxes to calculate for our individual shop. Hope that helps!

[carolynm]

we are not registered for provincial sales tax in BC as we do almost no
business there

[Ecomm]

i took me a while but this is my latest update to my shipping override

Canada at 5% takes care for me of alberta, bc, sk, MB, then for qc (quebec set at 9.975% + canada set at 5%), set the proper rate for HSTs provinces since we are located in a HST participating province. 

since we do not collect PST in BC, MB, and SK this is why i did not entered these as these are for the PST and not the combined % value of GST+PST which the GST is covered by Canada entry.

Alberta, Northwest Territories, Nunavut, Yukon are not listed as they are GST only province.

My two cents; this is a bad, bad update they added on Dec 20th and this override is not a good user experience (UX/UI) need improvements.

[MMlo]

Thanks for this fix! It worked for us too (in Alberta) however we are also in SK and we collect PST and we are currently seeing it double GST in SK. Anyone have a fix for this?

[Vanserve]

You have no idea how grateful I am to see a post like this! I have been having this issue and searching for MONTHS even before the Canada wide tax break! I have noticed a similar problem with my work's store regarding the shipping and the tax being charged incorrectly. If my memory serves me right, I think we caught this back in Sept of 2024 and did not know where to go and how to deal with this.

At first we saw that it was only happening for orders being shipped to BC. (We are located in Ontario) However, it would happen to orders being shipped to say MB, NS. As of today Jan 10 2025, I see 4 orders in consecutive order that have an issue where the tax is being calculated incorrectly for the shipping and all of the tax applicable items in the order are being calculated perfectly being shipped in ON.

Ex. Order being shipped to Ottawa (13% HST). 6 total line items without shipping, and 4 of them are taxable, shipping too. We have a 3rd party invoice system that has the taxes mapped out correctly and it is showing that the order is partially paid with a remaining balance of $.52 due because of tax calculation error. I was able to pull the tax lines for the line items and the shipping showing the rate, and the total being calculated. The api pull is showing that the tax calculated for the shipping rate of $13.83 is just $1.28 when it should actually be $1.80. (Actual rate Shopify calculated/shipping charge amount= .0375994215473608) .52/13.83=.0375994215473608

Ex 2. I decided to go pull another order and check the tax rates being calculated by Shopify and sure enough, the tax being calculated for the shipping is off by $2.98! Shipping charge was $25.75 going to ON (13%). Api pull showed $.37 being calculated, correct amount that should've been charged is $3.35. That means that Shopify was calculating the tax for the shipping at a rate of .014368932038835% .37/25.75=.014368932038835  

All of the line items in the order have the taxes calculated correctly so what is happening here?

Sure some of the differences may be small for some orders, but no matter what it all adds up! It is causing store operators like myself and others to be loosing money and potentially not being tax compliant.

I highly encourage other store operators to be cross referencing any of their orders on the GraphiQL app to see if each item in the order is having the tax calculated correctly.  Below will be a copy of the code block I used with the GraphiQL app. Some of the lines may not be relatable for you, but this does show me what I was looking for to prove that Shopify is calculating things wrong. 

You just need to copy the long number at the end of the link on each order page to enter on line 2 for it to work. (The code block is saying it is HTML/XML but it is not. It is the basic code used for the GraphiQL app.)

order(id: "gid://shopify/Order/8675309") 

query MyQuery {
  order(id: "gid://shopify/Order/8675309") {
    name
      shippingLine {
        taxLines {
          ratePercentage
          title
          rate
          price
        }
        source
       price
        shippingRateHandle
        originalPrice {
          amount
        }
      }
      taxLines {
        ratePercentage
        price
       rate
     }
      taxesIncluded
     totalTax
     lineItems(first: 30) {
        nodes {
         sku
           taxable
              taxLines(first: 10) {
                title
                ratePercentage
                rate
                  price
             }
         }
        }
     shippingAddress {
        formatted(withName: false)
     }
    }
}

I hope this helps some people figure out what is going on with Shopify and their own stores even though we may not have the same scenario, but there is definitely something funky going on of how Shopify is calculating the tax rates for shipping charges.