"New" Shopify Tax to account for UK/EU VAT sales

[Matt_Grech]

So, we are a UK-based business and use a third-party app integrated on our store to handle EU sales through whom we have registered for IOSS and they do all the EU VAT filing for us, etc.

Yesterday we received an email from them to ask us to ensure that we Opt-Out of a new Shopify Tax that is being rolled out at the end of October. 

We logged onto the Shopify support chat to ask about this new tax regime: https://help.shopify.com/en/manual/taxes/shopify-tax/pricing

However, we never received any emails from Shopify with this Opt-Out form or any explanation of what was being potentially rolled out. In our Chat with Support, they acknowledged that we had not received this particular email and promised they would send it out. We have NOT received it yet.
Just wanted to make other stores aware of this and to see whether we were the only ones not to receive the said email. If anyone has any insights or details of what was written in the email, it would be appreciated.
Thanks,
Celine

[RollingMaverick]

I'm in the same boat, but selling from mainland EU to the UK. I also got that email from that service asking to opt out. I have no clue what the New Shopify Tax service means and also no clue why I should opt out.

[Matt_Grech]

From the way we understood it from the above Shopify article, Shopify will charge for transactions over the limit simply for having a record of your VAT sales (over and above the transaction fee that they already charge). Shopify will NOT undertake any reporting or filing of VAT, so you still need a financial intermediary to do this. We see it as a way for Shopify to make more money for doing nothing....
Did you receive an email from Shopify notifying you of this change?
This is what the Opt-Out form says: 

We find it odd that such an important roll-out is not mentioned anywhere on the shop dashboards or highlighted in some way. We don't believe that they sent out the information to all shops either.

[RollingMaverick]

No I haven't received any Opt-Out form. As we speak I'm chatting with support

[RollingMaverick]

But what happens if you opt-out? I need clarification on what Shopify is offering. 

[Matt_Grech]

This is one link given to us by Shopify Support: https://help.shopify.com/en/manual/taxes/shopify-tax/pricing

But they could not even send us the opt-out link or a copy of the newsletter email that they supposedly sent (no access to it!).

[RollingMaverick]

Hi Teemu,  I'm selling from the Netherlands all over the world. You guys do my UK VAT reporting and I don't sell anything to the UK over the 135BGP threshold.

My bookkeeper does the EU One Stop Shop VAT reporting. I'm totally confused about the New Shopify Tax thing where you advised me to opt-out.

I use OSS for the EU. Is shopify going to fill in blank numbers for all EU countries if I don't opt-out?

[RollingMaverick]

Thanks, I opted-out and I also am waiting on support to clarify the situation. If I get a decent answer I'll post it.

[Matt_Grech]

We are lodging a formal complaint with Shopify's legal team as their Support were unable to provide a clear concise answer. They admitted that they do not have a specialised Tax Support team so could not directly answer our concerns. It is not acceptable as this can have repercussions on so many stores.

[RollingMaverick]

I got this total non-answer from Shopify. It does not explain anything:

Hi David,
 
As promised, here is the information that I have gathered from our Taxes Team.
 
Summary: Shopify will migrate merchants in the EU and UK from their existing tax services to the new Shopify Tax EU/UK, which will be free for the remainder of 2024 and provide automatic updates on tax rates in addition to other features and continued improvements. Merchants can choose between Shopify Tax, manual management, or third-party providers for tax services, with a clear option to opt out of the migration if desired.
 
FAQs gathered:
 
Why is this change happening?
Shopify is committed to offering the highest level of tax compliance possible, and are expanding our Shopify Tax service in the EU/UK to align with this objective. This change enables us to provide merchants with a more accurate calculations tool and new features such as invoicing and TLI (Tax Liability Insights), with less effort required on your end to keep up with compliance.
 
Can I opt out of this update?
Yes - the link is located in the email but also here. Kindly disregard the date on the Google Forms but follow the deadline you had on your email.
 
How much will I have to pay?
An estimated cost based on your current year's sales is provided in your email, if there is no cost then we don't anticipate your need to pay for Shopify Tax unless your sales increase to over 100,000/year in your local currency.
 
I don't want to pay for a tax service, what are my options?
Shopify Tax EU/UK will be free for the remainder of 2024.
 
There is still a free tier that's available for all merchants up to 100,000 GMV in calculations in your local currency per region. We also provide a manual tax service as an option which is free, but requires significantly more maintenance.
 
Lastly, I understand that there may be several details, but you may take time to check the complete information on the Shopify Tax EU pricing and Shopify Tax fees from this Help Center link.
 
If you have any questions, please reply to this email and I will respond the soonest time possible.

[Matt_Grech]

We have just received a reply - we are posting just the essential parts as it was a lengthy message:

Shopify sent out an email to some affected merchants on September 23rd, and the email would have been sent to the account owner email address on file for the account. I have checked with the Tax team and a new wave of emails will be sent to our merchants regarding the tax update on October 15th. This email will be similar to what your tax provider received and it will contain all of the information about the changes, included the opt out form. Additionally, I can provide you with documentation from our Help Center that goes over the changes here (this page is updated😞 https://help.shopify.com/en/manual/taxes/shopify-tax/pricing

There are no alerts on the store dashboards highlighting this change: This is something I am aware of and I will be passing along this feedback to our developers as I know how valuable it can be to have important messages shown in the admin! 

Merchants will not be forced to use the new Shopify tax system. The new Tax system will be rolled out on October 28th, and you can select Shopify Tax, elect to manage your taxes manually, or select a third-party provider for tax management. Additionally, you can change which tax service you use at any time.

 
I know you mentioned that you filled out the "opt out" form for the new tax system, but I'm going to provide the link to that form below just in case the one you filled out previously wasn't the correct form:
https://docs.google.com/forms/d/1BQBsQlRjNJCKVjpRLQmmJuGTyn33zWcztvedDDxfUsI/edit 

By opting out, your store will not use the new tax system and you will still be able to use your existing tax service. There should not be any disruptions to your tax service and the integration you have with your third-party tax service should still operate as normal. 
 
So to give a quick rundown here, since you didn't receive an email on September 23rd, you should receive one on October 15th regarding the tax changes. The new tax system will roll out on October 28th and by opting out, your store will not use this new service. You can change the tax service you use at any time now and after the roll out, so that will not change. There will not be any additional cost to you unless you use the new tax service AND your store meets the requirements listed in our Help Center page here.

[RollingMaverick]

Thanks, that is helpful since the opt-out form is different from the one I filled out. I will fill that out. Strangely I still haven't the slightest clue what exactly Shopify Tax offers us customers. What do they do?

[Matt_Grech]

From the limited information at hand, and reading that article about the pricing, Shopify will just create blank VAT numbers in the countries where you have made sales, then 'sort' out and generate a report of sales for you to deal with. And that's it. They are not collating that information and moving it on for VAT filing overseas. That's still up to you. And if you surpass that €100,000 in sales, they will charge you per transaction for doing that report.
We will look forward to that email of 15 October maybe it will be explained better but in our case it would be a double transaction charge on the VAT sales (besides the Shopify transaction fee itself from Shopify Pay) and over and above the transaction fee we pay to EAS for their handling of the IOSS. So to our business this would be a loss not a gain.

[RollingMaverick]

Thanks! Basically, they are not doing anything worthwhile. My EU transactions with VAT are automatically sent to my bookkeeper's software via a 15-euro app. The bookkeeping software automatically splits this into VAT per EU country and generates a filed report. I'm using EAS for the UK VAT.

This would also mean a loss for me.

[RollingMaverick]

This is what Shopify Tax supposedly offers. I still don't see how I would benefit. 

ere are the 3 main features of Shopify Tax for the European Union and United Kingdom:
 

VAT invoices
 

If your store sells to customers in the European Union or the United Kingdom, then you can generate VAT invoices in the Shopify admin that attach to an order confirmation page to ensure that you remain compliant with international tax requirements. As part of the early access program, improvements have been implemented to VAT calculations to improve accuracy.
 
To be eligible for VAT invoices, the following must be true of an order:
 

• duties were not calculated and charged for the order
• the order is being shipped to a destination in the European Union or the United Kingdom

 
Before generating VAT invoices, ensure that the VAT registrations are complete and up to date.
 

Product categories

 
If your store sells to customers in the European Union or the United Kingdom, then you can use product tax categories to improve the accuracy of your VAT rates. This is useful when there are lower VAT rates for certain products that you'd like to set.
 
Product categories are labels that are assigned to products or to collections of products. Product categories are used to indicate the tax obligations and exemptions that apply to a purchase. Product categories are selected from Shopify's Standard Product Taxonomy, which is a predefined and standardized list.
 
Product categories are also useful for managing your products, and can be used for the following tasks:
 

• filtering your product list
• creating automatic collections
• selling on channels that require a standardized product type, such as Facebook
• adding category metafields that can be connected to your variants

 
When you create a product and enter a name, description, and add images for the product, this information is used to automatically generate a product category suggestion. This category is only a suggestion, and shouldn't be considered tax advice.
 

Tax calculation by using product categories

 
After you categorize your products, the categories are used to automatically determine your tax obligations when selling into a particular region. Using product categories increases the accuracy of tax calculations, and reduces the need for tax overrides.
 
If you set a product category for a product that has an override in place, then the override takes precedence over product category tax calculations. This includes collection-based tax overrides. Consider removing any product tax overrides that conflict with your product categories. However, if you're aware of tax rules that aren't calculated by product categories, then keep your product tax overrides.
 
You're not required to use product categories. If you choose not to apply product categories to your products, then you need to use tax overrides and manually update them.

[RollingMaverick]

I don't understand. Since when? When I look at my EU orders and the UK orders (I ship from the mainland EU), my customers are charged the proper tax. How are my clients being double-taxed? I don't see this on their invoices (I opted out).

[Matt_Grech]

Hi Teemu - we have just checked our shop tax settings and indeed there are 2 new sections/fields although they are not collecting tax. The one that is collecting tax IOSS is the one set up using our EU VAT registration number as registered by EAS. So probably merchants have to manually set up the Shopify tax themselves as the specific country rates or VAT numbers are not filled in automatically in these new fields.

We did not receive any email updates from Shopify regarding this so probably since we opted out, they did not inform us.

[MIkhail_Murom]

Hi Matt_Grech,

From long, long conversations and lot of tickets (still opened and not clearly answered) we understood that email are sent in at least two batches. No any clarification about the logic how merchants included into the mailing list.

You are happy one if your store not reflected by this changes.  
If no changes made to your store tax settings, this is good and no worries.

Yesterday we faced with changes on the tax settings for one of our customers. In the tax settings Domestic region added automaticaly to the VAT collection region and IOSS marked as "Not collected"

The result of chatting with support is:

14:46 Merchant: I have question regarding changes that Shopify made in the store. 

14:47 Merchant: IOSS scheme is not available for me..

14:48 Merchant: I can not remove Slovakia from VAT registration

.........

15:36 (Support Advisor): I was instructed that this should be escalated.

[RollingMaverick]

Mine works fine. I also received an email yesterday about the new changes.

 

We’re announcing an important update regarding the tax service that your store(s) use(s) to power VAT calculations on orders from countries in the European Union (EU) and United Kingdom (UK).

Beginning on October 28, this service will be retired and your store will be automatically upgraded to Shopify Tax, to provide superior tax compliance across the EU and UK:

• Smart calculations at checkout: Accurate VAT rates based on your customers’ location, product categories and shipping taxed proportionally on each order.
  

• VAT registration and threshold tracking: Get alerts when you need to register based on new or existing liabilities.

• VAT invoices: Generate, store, and display compliant invoices for customer and B2B orders.

We are upgrading you to Shopify Tax in the EU and UK. Shopify Tax will remain free until December 31, 2024, no matter how much you sell. Shopify Tax will be free until you reach €100,000 in total sales globally per store, each calendar year. After that, standard rates will apply to all orders in the regions where you collect tax.

For these store(s) below, based on your EU and/or UK sales from the previous 12 months we estimate that Shopify Tax in the EU and/or UK will cost:

• Rolling Mavericks: €10 per month

If you don’t wish to try Shopify Tax for free until December 31, 2024 and would like to exclude your store(s) from the upgrade, submit your request using this form by October 27, 2024. You can also choose to downgrade later from within the admin.

If you opt out, your store(s) will use Basic Tax starting October 28. Basic Tax is free, but provides a lower level of compliance and automation. You will need to:

• Manually keep rates up to date
• Track your tax liabilities as you grow
• Find a new invoicing solution

By using Shopify Tax, you are agreeing to the Shopify Tax Terms of Service.

[MIkhail_Murom]

Sounds great! You're lucky one!

Unfortunately, not all are so lucky, some of stores stops collecting taxes on checkout at all, some of starts unexpectedly collecting taxes for orders over 150 EUR.

[Matt_Grech]

We also received the email finally last night and have filled out the Opt-Out form again. Our charges would be £20 per month...

So how does it handle UK Sales for you as IOSS is turned off?

[RollingMaverick]

I don't use IOSS since I use OSS as an EU member selling goods already in the EU to other EU countries. 

[golfer101]

So, just to confirm, this is the form you guys all saw?

I was almost certain this was spam as the dates differ (email says fill out the form by October 27th, the form says to fill it out by October 23rd)...

Also find it wild a company of this size is asking us to fill out a google sheets form... so wanted to check one last time whether this was spam or not. Email came from email@email.shopify.com

[golfer101]

Spoke to Shopify and it's not a spam message. Just a very amateur process, can't believe how poorly this has been done. Massively eroded my trust in them.

[matt_b_london]

Hi Matt,

I’m facing a similar situation. Were you able to confirm if opting out of Shopify Tax will affect the ability to collect UK VAT at checkout and generate VAT-compliant receipts for UK customers? This is my primary concern, as I also use a third-party intermediary for handling EU sales and would prefer not to disrupt that setup.

Thanks in advance for any insights you can share!
Matt

[Matt_Grech]

Hello Matt,
From our end we filled in the opt-out form and when checking our tax settings set-up, so far everything is being processed as usual using our third-party app (EAS). As yet however, we have not received an email from Shopify to CONFIRM our opt-out (as they specified that they would in their last email). So I guess we will know for sure on October 28 when the system is fully rolled out.

At the moment our tax set-up looks like this and the individual countries of the EU all show the EU VAT no. for which we are registered through EAS.

For the UK:

For the European Union:

Then individually per country, ensure it shows the same EU VAT no:

So our settings were not changed and we have had orders from the UK and the EU and all VAT is being collected as before.
Celine

[matt_b_london]

Thanks Celine, this is very helpful. 

I'll follow suit and see how it plays out