Dealing with Temporary GST/HST Exemptions in Canada

[jkapedanicpa]

Starting December 14th the Government of Canada is providing Sales Tax exemptions on certain qualifying products until Feb 15th, 2025.  

Currently, Shopify's fix for this is that we create Collections and apply a tax rate override, which would be a great solution except for the fact that this override can only be applied to Collections that were created Manually, not using their "Smart Collections" feature. 

I have clients that have thousands of inventory items and are a mix between items that qualify for the tax exemption and ones that don't.  It will be insanely time consuming to sift through thousands of inventory items, manually adding each one that applies. 

Is it possible for Shopify to allow for us to use the Smart Collections feature to apply the tax overrides? Or will the be coming up with another solution for what I can only assume will be thousands of affected customers?

If any one else has a solution that would be great! 

[TopShelfCo]

Following this thread as we are running into a similar issue. While well intended that excluding automated collections for normal circumstances, we are dealing with a new adjustment and require automated collections to be included in the tax-exemption list.

[HazemK]

When I contacted Shopify Plus Support to see if they will have a solution in place, I received this response:

Please note, our developers are working hard on a solution that will ideally be released before the exemption comes into place. We don't have additional notes or help docs to share on this as of now, but once they are ready they will be released. 

As of November 10th, I have yet to receive any update from them regarding this issue; with 4 days left to go.

I am surprised that a supposedly Canadian company have so little regard to the needs of Canadian retailers.

[mcrawford]

Mike from Shopify here. We are automating compliance with the Canada sales tax holiday bill.  If a merchant has Product Categories up to date, there is zero time or effort needed. Goods with the appropriate categories assigned will be automatically zero-rated. 

More info: https://help.shopify.com/pdf/Canadian-Holiday-Tax-Break-Guide-for-Shopify-Merchants.pdf

[HazemK]

Hello Mike, thanks for confirming. A question regarding the categories and the taxes on them, are taxes applied according to the category specified on Shopify? When we first setup our Shopify Store, we were told that we need to create a manual collection to override taxes on certain items like baby clothing and baby car seats. Has this been updated so that we can simply select the appropriate category and the taxes are applied accordingly at checkout? or do we still need to use the manual tax override settings?

[shubify]

Hey HazemK, we've implemented this so that if you have your products categorized into one of these categories, Shopify will automatically zero rate the items for the duration of the tax holiday period. No collections/manual overrides needed.

Hope this helps, and hope we made your life a little easier 🙂 

[HazemK]

Hi Shubify, is this only for the Holiday Tax break or is this live for the regular tax exemptions?

For example, Car Seats are exempt from the PST portion of the 13% HST in Ontario, so they are only charged 5%. I am currently using the manual tax override method to get this desired result. If I change the category for car seats accordingly and turn off the manual tax override setting, would Shopify automatically charge 5% tax rate at checkout instead of 13% for Ontario customers?

[shubify]

This is only for the holiday tax break for now, given the urgency and potential to harm businesses. Eventually, we're hoping to bring Shopify Tax to Canada, but it's not in our near-term roadmap. Hope this helps!

[HazemK]

Sounds reasonable. Do I need to turn off the manual tax override settings we setup in the Tax Settings for our store during this Holiday Tax break period in order to not interfere? According to what I read on the help guide, it sounds like any manual tax override settings we setup would override Shopify's taxes at checkout. I need to know so that we can have arranged to have those settings turned off during this period.

[shubify]

Yes, please have those manual tax override settings turned off so that they don't interfere with these categories and our zero rating. Thanks for clarifying!

[Dismi14]

For apparel, is it only Baby and Toddler apparel that applies? What about youth clothing? I do not see any categories for youth clothing.

[shubify]

Hey Dismi, 

You can find all the relevant categories in this PDF. If a category is not listed there, it will not be zero rated during the tax holiday duration.

[WT2]

Hi There,

I just want to confirm as long as the main category for example is Toys & Games it will make everything in that category zero rating?

[mcrawford]

That's not correct. You must pick one of the sub-categories detailed in the help guide: https://help.shopify.com/pdf/Canadian-Holiday-Tax-Break-Guide-for-Shopify-Merchants.pdf 

[WT2]

Thank you for confirming!

[ginotpetrocco]

Sorry for droning on... Just to ensure we are at the right level.... In the sample below Bakery as a category is sufficient, and that's why it's highlighted?? Correct??
As such it would cover the more detailed levels listed??
[cid:image003.jpg@01DB4CBF.9F08CC20]

[shubify]

If your product category is the same as the ones bolded in the pdf, then it will be zero-rated. I sadly can't see the image you've attached (I just see the filename).

[Dismi14]

According to this it applies to youth clothing also - https://www.canada.ca/en/department-finance/news/2024/11/more-money-in-your-pocket-a-tax-break-for-a...

[HazemK]

According to the Government of Canada's website, Children's clothing qualify for the tax break

https://www.canada.ca/en/services/taxes/child-and-family-benefits/gst-hst-holiday-tax-break.html#toc...

I'm not 100% sure on how would "Youth" clothing would be categorized, The link above describes children clothing as "Children's clothes in sizes XS, S, M, or L" and the only size limit I see is on children shoe sizes with "Children's footwear with an insole length of 24.25 cm or less"

[caelengummi]

Thank you Mike for providing this link and providing some clarity. Do you know if Shopify has a plan to send this out as an email or newsletter to all Canadian Shopify merchants? I understand all of us, Shopify included, are running on a tight timeline, but I shouldn't have to go through pages of google to find the answers I'm looking for buried in the comments on a forum post, especially if this PDF is available and ready to go. 

[mcrawford]

There was an email sent yesterday and banners will go up in admin. Apologies for the turn around time, we’re doing our best given the bill’s status, changes and timelines. 

[caelengummi]

Absolutely, I know we're all scrambling right now, no need for an apology. We're all running on a tight timeline, I get it. 

[shubify]

Hi there! You should have already gotten an email sent to you. If you haven't, please send your storefront name to shub.gaur@shopify.com and I'll try to understand why you haven't gotten the email. 

Also- we have a note on our help center page here!

[caelengummi]

Thanks! I'll send over an email.

I was able to find the info regardless so it's not a huge problem, just thinking about the people who don't know how to find things via google unless they're the first few results. 

[shubify]

Appreciate the feedback!

[ginotpetrocco]

we've gone through our over 5k product/variant to set the categories. Now looking for a way to include them in a manual collection using bulk editor but this is not available within bulk editor. we need a way to verify the non-taxable items.

[shubify]

Hi Ginotpetrocco,

If you've set the categories for these products as one of these categories, for orders in Canada, the products will not have HST/GST charged on them. Having these products in a manual collection is not necessary for the tax collection change to take place.

[ginotpetrocco]

How do we test our setup before live?
Do we need to remove our current GST exemption in settings/tax

[shubify]

Sadly, no way to test the setup before going live. If your product is one of the above categories, it will be zero-rated.

You should remove any manual overrides in tax settings.

[HazemK]

So there's no test store or anything like that where we can test to see if Shopify Tax zeros out the taxes for products within the specified categories? How do we know that it will actually work?

Since this Holiday Tax Break starts on the weekend, our office staff won't be available to implement any emergency manual tax override, and our Brick-n-Mortar store location would have to fend for themselves!

Is there no test store to ensure that the Shopify Tax solution would work as intended??

[shubify]

Hey HazemK, sadly no test store. Please keep in mind that we're adapting to this change out of the blue, just like you, and have essentially had a few days' notice. We've been trying to ensure merchants aren't left hanging, more than anything.

If you use the categories in this pdf, your HST/GST will be zeroed out for this duration.

[chcsep]

Hi Mike,

Our books are available in print and ebook format, and each title is combined into a single product with "print", "ebook", and "print+ebook combo" variants. 

Does your automated compliance mechanism apply to ALL variants, or only those with the the "This is a physical product" variant option selected?

[shubify]

Hey Chcsep!

This automated compliance mechanism applies to all variants, since it's a product-level category.

[chcsep]

Not the answer I was hoping for, but I appreciate the timely reply nonetheless.

[chcsep]

Edit: Given the small number of physical tax-exempt products we sell, I was able to simply uncheck the "charge tax on this variant" checkbox on the relevant variants. 

[footprinttash]

Hi Mike

If we don't have our product categories matching, but we choose to just manually remove the checkbox on the "charge taxes on this product" button, I'm assuming that is sufficient? 

[shubify]

That should work! It's not the official solution, but exempting your products is a viable workaround.

[CBenzCOL]

Hi Mike! I believe I have all my affected products categorized properly however I am still seeing GST being applied. I contacted Shopify on Saturday and after some back and forth, I was told this morning that I need to create a product collection and set up a tax override! The Support Advisor told me it is because I am in Canada and that the automatic system is only for the US and UK. Can you help? I have customers waiting to buy until the GST is removed... Creating a tax override isn't easy and we're already four days into this and the busiest time of year!

[mcrawford]

Hello, apologies for any confusion. It appears that your shop is on our "Manual" solution, which does not support automatic rates. Two options:

• Create overrides for affected products
• Reach out to support and be asked to be migrated to the automated solution

If you have a support ticket where they told you there wasn't an automated solution, please send me a message and I'll have that corrected.

[CBenzCOL]

HI Mike!

Thank you for your super speedy reply! I really appreciate it! I do
have a support ticket on the go:

The ticket number is 53347687.

Should I ask him to migrate me to the automatic solution? Or open a
new ticket? Because I need this to happen today (if possible!)
Does this migration affect other aspects of our site?

Thank you so much!
Catharine

Below is the latest message in the transcript:

Mark D
3:07 am
Hi Catharine,

This is Mark from Shopify.

I wanted to share an update from our Taxes team regarding tax
calculations in Canada. It's important to note that categorizing
products won't be effective here, as we use a Shopify Tax system that
automatically calculates product tax based on categories—but this
system isn't available in Canada yet. It is, however, in use in
countries like the US and the UK. If you check your tax settings and
select the US, you'll notice that the Shopify Tax system is in
operation.

For Canada, during this GST holiday, you'll need to set up a tax
override and apply a 0% tax rate. To do this, start by creating a
product collection that includes all the products that will be exempt
from tax. Once you've created the collection, navigate to your
settings, select the Taxes and Duties section, and then choose Canada.
>From there, you can create a tax override for that collection.

[CBenzCOL]

Thanks so much for your speedy reply! I sent you a DM with support ticket number. Not sure if I should open a new ticket for migration since that Support Agent was not aware of this option. 

[CBenzCOL]

Hi Mike,

I responded to my open ticket yesterday and they said they "would forward this to the Tax team, and they will assist you directly from here. Please wait for their response via email."

But I have yet to hear anything. How long should I expect it to take to migrate me to automated solution? 

[shubify]

Hi CBenz!

We have taken the action and migrated your store to the new tax engine. Hopefully it solves your problems. You only have a GST registration inputted in your admin, so if you want to collect PST in the various provinces not covered by HST, you should create those ASAP.

Please to check your tax rates again to make sure nothing has changed from your intended amounts! Otherwise, the categories should work now!

[Steve_Morrier]

I updated all my Categories and it's still charging HST. This is a nightmare. 

[shubify]

Hi Steve, hope I can be helpful. There could be a few reasons that you're still charging tax after updating all of your categories:

1. You have product overrides. You have put products in a collection and set a manual tax rate on them, which could be overriding any changes that we have made. These take precedence, so please remove them if you have them.

2. You are not using registration based taxes in Canada. In this case you need to input your registration number within your taxes and duties settings and reach out to support and ask them to move you to registration based taxes. If you do this and you don't have overrides, the products should no longer charge tax where relevant, automatically.

If you run into further issues, please message me at shub.gaur[at]shopify.com

[AEmedia]

Hi @mcrawford and @shubify I am a Partner working with a storeowner to solve this tax issue, and they are having trouble getting it to work. They are a wine seller, and have assigned all the products to Category: Beverages & Tobacco > Beverages > Alcoholic Beverages > Wine but adding anything to the cart still shows the note "Including $XX in taxes". Other wine sellers we have checked it will show "Including $0.00 in taxes" so we are unsure what is we are doing wrong.

The site is https://malivoire.com

Also note there are no custom tax rules in the store, and they do have a HST/GST number assigned in their settings.

Any help is much appreciated thank you!

[shubify]

Hi there! Seems like this store is on our old tax engine right now because of some custom rates being set. 

I'm happy to move your store to the new engine so that the category-based exemptions apply, but please know that the rates may change (e.g. Manitoba will change from 8% (set by merchant) to 7% (Shopify's standard rate)).

You can adjust these with overrides, but if you're okay with this change, I can do it as soon as you give me the green light 🙂 

[AEmedia]

YES PLEASE! Go ahead and let me know when its done of if there is anything I need to do. Thank you!

[shubify]

Done! 

We have taken the action and migrated your store to the new tax engine. Hopefully it solves your problems.If you want to collect tax in the various provinces, you should create registrations in admin for those regions ASAP to preserve collection. This means registering for GST/HST/PST and inputting it in your taxes & duties settings under canada.

Please to check your tax rates again to make sure nothing has changed from your intended amounts! Otherwise, the categories should work now!