What Happens if I Opt Out of Shopify Tax? Will I Lose VAT Receipts for UK Customers?

[matt_b_london]

Hey, 

I recently received the notification about Shopify Tax being automatically applied to my store starting on October 28. I’m currently using a third party application (EAS) for EU VAT registration, reporting, and filing, but I need some clarity on what happens if I decide to opt out of Shopify Tax and switch to Basic Tax.

My main concern is ensuring compliance with UK VAT requirements, especially regarding VAT receipts for UK customers. Specifically:

1. Will I lose the ability to generate VAT-compliant invoices with the necessary VAT breakdowns and my VAT number for UK customers, if I opt out of Shopify Tax?

2. How will Basic Tax handle VAT at checkout for UK and EU customers? Will I still be able to display accurate VAT rates? At the moment, I manually set the VAT rate with guidance from EAS for our EU markets

I want to avoid any disruption to VAT invoicing or checkout functionality, as these are critical for my business. Has anyone else opted out of Shopify Tax and had to manage VAT compliance manually or through another solution?

Any advice from fellow merchants or insights from the Shopify team would be greatly appreciated!

[Finer]

@matt_b_london some of our clients have received the same notification and I also checked the difference to Shopify Basic Tax.

It seems like Shopify Tax automates some process depending on product types the market settings. 

https://help.shopify.com/en/manual/taxes/us/choose-tax-service

Did you, by any chance, use the invoicing tool provided by Shopify tax?

From my understanding, Basic Tax will also handle VAT at checkout, just not automated by product type.

[mcrawford]

Hi Matt - Mike from the Product Team 

Will I lose the ability to generate VAT-compliant invoices with the necessary VAT breakdowns and my VAT number for UK customers, if I opt out of Shopify Tax?

• Shopify Tax will generate VAT invoices for you (separate setting within admin). If you leave Shopify Tax, the ability to continue to generate will indeed be severed. However, no matter your choice in tax service, you can use any app in the App Store (or your ERP) to generate VAT invoices. 

How will Basic Tax handle VAT at checkout for UK and EU customers? Will I still be able to display accurate VAT rates? At the moment, I manually set the VAT rate with guidance from EAS for our EU markets

• Shopify Tax is higher compliance than Basic and Manual Tax. It uses your product categories to automatically reduce or zero rate goods (as applicable) and applies VAT on shipping proportionally. Further enhancements are planned. 

[Finer]

@mcrawford does Shopify Tax also consider temporary local tax reductions (e.g. Solar Panels in Germany)?

[mcrawford]

Let me double check this for you. I’ll be back early next week. 

[mcrawford]

@Finer if you don't mind sending us an email with a shopID, we can look into it for you. There's some nuances that we'd love to better understand.  

[Finer]

@mcrawford thanks, but I would appreciate it if we could keep this topic in the community as a reference for merchants who might have the same question. I would also like to highlight that @pathway_team (pathway) App is the only (known) invoicing tool for German merchants that calculates the shipping taxes correct. When merchants offer regular and reduced tax-rated products, the shipping tax is calculated with the ratio of these tax rates. This is something Shopify Tax does seem to consider.

Is this something Shopify Tax will consider soon?

[mcrawford]

Shipping taxes are calculated proportionally (the ratio as you describe) in both the UK and EU on Shopify Tax, yes!

In terms of keeping in the community, happy to provide an update here but there's nuances that I'd like to connect with you on to further understand (there's multiple different regulations about taxing solar panels). 

[matt_b_london]

Hi Mike,

Thanks for the clear response—really appreciate it!

Just to be certain, my main concern is maintaining the ability to generate VAT-compliant invoices with the necessary breakdowns and my VAT number for UK customers. If I opt out of Shopify Tax specifically for EU markets but still want to keep this function active for UK customers, would that be possible?

Or, if I opt out entirely, would using a third-party app be the only solution to keep UK VAT invoicing compliant?

Thanks again for helping me navigate this!

Matt

[mcrawford]

Hi Matt,

We’ve built Shopify Tax to allow you to turn features (eg VAT invoicing) on or off by “region” and to choose a tax service (eg Shopify Tax, Basic Tax, Manual Tax) separately in each region. 

If you wanted to be on Shopify Tax in US, EU, and UK but only turn on VAT invoices in the UK, this is possible. 

If you wanted to be on Shopify Tax and use VAT invoices only in the UK and be on Basic Tax for the rest, this is also possible. 

[matt_b_london]

Thanks Mike. The opt out form does not allow for me opt out of the EU and the US. 

I will opt out on the form and then opt in to services if needed. 

[mcrawford]

It is free until the end of the year (and VAT invoices must be specifically set to on) so you do have 2+ months to give it a try before having to make that decision.

[pathway_team]

thanks for your help here @mcrawford . We have 2000 clients using our app in Germany for accounting and bookkeeping. We tried to test the invoicing feature in order to provide them guidance, but it seems although we have the 29.10 the invoice feature cannot be manually enabled (or we do not find the option to enable it in the 4 live stores we have access to?)

[mcrawford]

Hello @pathway_team - thanks for giving Shopify Tax a test run. We're rolling out incrementally this week so it may take up to Friday for these stores to be upgraded. I'll send you an email and we can get one of your stores on it and connect you with the Product team who can answer any questions. 

Be on the lookout as well for a partner webinar planned soon.