I need to set up a second tax rate for shipping (I'm based in The Netherlands). I sell products that are taxed differently (21% and 9%) and when a customer buys a product, the shipping tax rate should follow the product they purchased. So if they bought a product with 21% tax, the tax rate on shipping should be 21%. If they bought a product that has 9% tax on it, the tax on the shipping should be 9%. I do not seem to be able to do this within Shopify.
Can it be done? Or with a Shopify Plugin?
This should be achievable via the use of tax overrides, which allows you to set different tax rates for different products and for a specific region. You can go ahead and filter your products in two collections; one for the products that are due a 9% tax rate to be applied, and another for the products that carry a 21% rate of tax. These collections can then be used in tax overrides to apply the different rate of taxes for the product.
You'll then want to enable the "Charge tax on shipping rates" option in Settings > Taxes, without adding any shipping overrides:
If you have this option enabled and no shipping overrides are present for the Netherlands, Dutch customers should then have the appropriate rate of shipping tax added to their orders (e.g. 9% shipping tax for products with a 9% product override, and 21% shipping tax for 21% products). For split orders, the tax rate that makes up the majority of the order is used.
I hope this explains things but please let me know if you have further questions.
Thank you for your reply!
As of right now, my settings are as you recommended, but the tax rate on shipping isn't following the tax rate on the product, as you can see in the first screenshot of an order. The product has 21% tax on it, but it charged 9% tax on the shipping. Have I missed something?
Right, thank you. I appreciate you sharing those screenshots. Can you confirm to me what "Btw" refers to here? Is this the name of a product or shipping rate? I just want to be 100% sure on what I am looking at here.
Victor | Shopify Social Care
Okay, thank you. I tried to replicate this on my test store and received the same outcome as you—a shipping tax rate of 21% was applied at checkout when I had a product with a 9% tax rate in my cart.
I reached out to our taxes team on this and asked what might be happening here, and if there was a way to set two different shipping tax overrides for a single country. They notified me that Shopify's automated tax system is setup for numerous countries, and the way the taxes are applied depends on the registration settings for our tax system. This means that when you enter in your VAT number in your tax settings, Shopify's automated tax system will use this information to charge taxes for the country in question.
We can take a closer look at this, but we first wanted to learn more about where you have seen that the taxes on shipping needs to be the same as the taxes applied to the product. Do you have any documentation you can provide that specifies that this is a necessity for Dutch merchants?
Victor | Shopify Social Care
Thank you for looking into it further. I have asked my accountant to provide documentation that states this rule for Dutch merchants. I will get back to you as soon as I receive it.
Do I understand correctly that as of right now this isn't a feature in the Shopify system? And Shopify will implement it if you learn this is a necessity for Dutch merchants?
You can find the information on the official website of the Dutch Tax Authorities (in Dutch they are called De Belastingdienst). Unfortunately, it is only available in Dutch (the bit we need is titled: Voorbeeld: Bezorgkosten), but I've translated the excerpt for you below.
"Example: delivery costs
Do you sell goods and also take care of delivery to the customer? In that case, the same rate applies for the delivery costs as for the goods. Do different rates apply to the goods? Then you calculate the delivery costs in proportion to the compensation for the goods."
Verkoopt u goederen en zorgt u ook voor bezorging bij de klant? Dan geldt voor de bezorgkosten hetzelfde tarief als voor de goederen. Gelden voor de goederen verschillende tarieven? Dan berekent u de bezorgkosten naar verhouding van de vergoedingen van de goederen.
Very much looking forward to the next steps. Thanks!
We have the similar situation in Sweden and I am working on a store that needs exactly this.
Here is the information from the Swedish tax authorities (in Swedish though): https://www.skatteverket.se/omoss/varverksamhet/rapporterremissvarochskrivelser/skrivelser/arkiv/ar/...
If there is a mix of items with different tax rates, then the tax rates (VAT) for the shipping should be split up accordingly.
In my case, we have 12% and 25% VAT on items in the store.
Thank you for sharing this with me here. I have taken this to our taxes team and shared the link you provided so that could take a look into this. They have informed me that at this moment in time, our tax system cannot be updated in the way that you are looking for it be changed, but that I should submit a report to them so a record of this request is noted. This may be something we'll be able to change in future but at this time it does not seem this is possible with our automated tax system.
Do I understand correctly that you are building this feature for a Shopify store?
If so, I would love your help on this.
That is unfortunate. From another poster on this thread, I see that Sweden has similar rules on shipping tax as The Netherlands, so this is a feature that many European merchants would need in their store. I will continue to look for a solution, hopefully, someone will be able to make this customization in my store. Because of course, paying 21% tax instead of 9% on shipping is quite a chunk out of our projected margins and is a bummer to put it mildly.
Would there be a way for us to batch correct the shipping tax calculated on specific orders? So that we might correct the shipping tax after the order is placed?
I can appreciate your frustration with this, for sure. When I spoke to our taxes team and submitted your feedback it looked like other EU merchants had reached out about this, so the issue has been documented and hopefully it's something that'll be looked at in future.
In terms of what you can do now, you'll have the option to refund customers part of their order if they have overpaid—this can't be done on a bulk level, but you'll be able to reimburse the customer for each order where this is the case.
I am not able to confirm that this change will be made, or when it may be implemented. I have submitted feedback to our development team and I know our team that works on Shopify's tax system regularly checks it to make sure it's up-to-date and working for our merchants in various countries. If this is an error then hopefully it will be amended in due course but I cannot confirm when that will be.
My understanding is that this feature request is currently being considered by our taxes team, but there is no news currently on when this change will be made. If I hear that this change has been made, or that there is a date where we plan to make this change, I will seek to update you and others waiting on this change in this thread.