Shopify disabled "Charge sales tax on shipping" automatically

[SRSM]

Shopify disabled "Charge sales tax on shipping" automatically. I'm in Canada, so I thought it might have been because of the national tax holiday that started on Dec 14, but after investigating our past orders it looks like we were still charging tax on shipping up until noon on Dec 20th.

What's even stranger is after I toggled the feature back on, I received an email saying:

[user] disabled include taxes based on the buyers country feature
[user] enabled tax on shipping, this only applies to legacy tax in the US

All I did was click the toggle a single time. It is still enabled, but taxes aren't being charged for shipping.

Is anyone else having these issues? AFAIK shipping is not covered under the tax holiday. At least it doesn't seem that way because all my couriers are still charging me tax. 

[Ecomm]

Subject: Urgent Issue with Tax Calculation on Shipping Fees During Canadian Tax Holiday

Dear Shopify Plus Support,

I am writing to raise an urgent issue related to tax calculations on shipping fees during the ongoing Canadian federal tax holiday (December 15, 2024, to February 14, 2025). This issue has significant implications for compliance with Canadian Revenue Agency (CRA) regulations and is impacting both our business and our customers.

As a Shopify Plus retailer based in Canada, our team discovered that Shopify’s proportional tax calculation on shipping fees for orders containing tax-exempt products is not aligned with CRA guidelines. According to the CRA, the GST/HST holiday applies to specific product categories, and there is no mention of shipping fees needing proportional tax adjustments.

Details of the Issue:

• Tax is being undercharged on shipping fees when orders include products eligible for the federal tax holiday.
• This behavior appears to stem from Shopify’s recent update: Shopify Changelog - Proportional Tax on Shipping.
• CRA guidelines for the tax holiday do not mention shipping fees needing proportional adjustments: CRA Tax Break Details.

Impact:

1. Compliance risk: The current implementation could expose our business to audit risks if customers are charged incorrect taxes.
2. Customer dissatisfaction: Customers may perceive our pricing as inconsistent, which damages trust.
3. Revenue loss: Miscalculations on tax can lead to operational challenges, particularly during the peak holiday season.

This issue is not isolated to our store, as similar concerns have been raised in the Shopify community forums: Community Thread on Tax Errors.

Request for Action:
We request that Shopify prioritize this issue and provide an immediate resolution to align with CRA regulations. Specifically, we need:

1. A review of how tax is calculated on shipping fees for orders with tax-exempt items.
2. Confirmation that tax calculations adhere to CRA guidelines during the tax holiday.
3. Guidance or workarounds for Shopify Plus merchants impacted by this issue.

This matter is critical to ensuring compliance and maintaining customer trust. Please acknowledge receipt of this email and provide an estimated timeline for resolution.

Thank you for your prompt attention to this matter. I look forward to your response.

Best regards,

[SRSM]

Thank you for sharing. I can confirm that it's only orders that contain products eligible for the tax holiday that are also being exempt from shipping tax. That's something I previously missed, because very few of our products don't qualify.

This is wild. Shopify needs to fix it ASAP. I reached out to their support team and they seemed to have no clue what I was talking about.

[Ecomm]

i am currently exchanging with Shopify Plus Support on this matter; here is a copy of my last reply:

Thank you for your follow-up and for providing additional insights into the matter. I appreciate your proactive support in addressing this issue.

However, I want to clarify that the problem is not specific to any individual order or product setup but rather with the functionality introduced in Shopify’s Dec 20th, 2024 release, as described in the Shopify Changelog.

Key Issue:
The proportional tax calculation being applied to shipping fees is incorrect during the federal tax holiday. No part of the CRA’s documentation or the Canadian government’s GST/HST tax break guidelines specifies that shipping fees should be taxed proportionally based on the mix of zero-rated and taxable items in an order.

In fact, shipping fees are explicitly not part of the tax break:
CRA Q&A - Shipping Fees Not Included.

Concerns:

• Shopify’s proportional tax calculation on shipping fees introduced in the Dec 20th release is causing undercharging of sales tax on shipping fees, which could lead to compliance issues for Canadian merchants.
• This implementation contradicts the CRA’s rules and the intent of the federal tax holiday.

Request for Action:

1. Please review the Dec 20th, 2024 release and confirm why shipping fees are being subjected to proportional tax calculations.
2. Provide clarification on whether Shopify intends to align with the CRA’s explicit guidelines, which do not require proportional tax adjustments for shipping fees.
3. If this is a system-wide issue, Shopify should prioritize reverting or adjusting this change to ensure compliance with CRA regulations and merchant needs.

I should not have to provide specific examples or screenshots for this matter, as the issue lies with the system-wide implementation of the proportional tax feature. I trust Shopify will recognize the importance of resolving this promptly to prevent further compliance risks for Canadian merchants.

Thank you for your attention to this matter. I look forward to hearing how this can be resolved.

Best regards,

[Facilealire]

I just noticed the same thing! I will keep looking this close. Thanks.
I dont even know how to put it back. Were you able to ?