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Why is my sales tax calculation slightly off on Shopify?

wyrdbyrd
Visitor
2 0 1

I just made my first sale using Shopify and I noticed that, at least in this case, the sales tax calculation is off. I am in Michigan and our sales tax is 6%. The order in question came to $81.13 and Shopify charged $4.88 for sales tax. However, 81.13 * 0.06 = 4.8678 which should round up to $4.87 and not $4.88. I am really not sure how it is getting $4.88 since the value is below $4.87 ($4.86 or $4.87 make sense). I realize this is only a penny but customers notice these things at times and it also messes up our accounting. Is there anything I can do to correct this in my settings? I haven't found anything yet. Thanks!

Accepted Solution (1)

Greta
Shopify Staff
1167 122 148

This is an accepted solution.

Hi there, @wyrdbyrd!

 

First of all, I want to say congratulations on your first order! This is such an exciting time 🙂 I'm happy to look into your tax question with you. 

 

Can you confirm whether there were multiple items in this order? I ask this because on Shopify, tax amounts are rounded at the line-item level. This means that the total tax value is calculated by applying the tax rate to each line in the order, rounding the results, and then adding these subtotals together to arrive at the total value of the order. The result of this is sometimes the tax amount is different than what it would have been if it was applied to the total order amount. You can read more about tax rounding in this help document

 

If you'd like to share the items in this order as well as their prices I can definitely take a look and see whether the tax amount makes sense. 

 

I look forward to helping you further!

Greta | Shopify 
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Replies 5 (5)

Greta
Shopify Staff
1167 122 148

This is an accepted solution.

Hi there, @wyrdbyrd!

 

First of all, I want to say congratulations on your first order! This is such an exciting time 🙂 I'm happy to look into your tax question with you. 

 

Can you confirm whether there were multiple items in this order? I ask this because on Shopify, tax amounts are rounded at the line-item level. This means that the total tax value is calculated by applying the tax rate to each line in the order, rounding the results, and then adding these subtotals together to arrive at the total value of the order. The result of this is sometimes the tax amount is different than what it would have been if it was applied to the total order amount. You can read more about tax rounding in this help document

 

If you'd like to share the items in this order as well as their prices I can definitely take a look and see whether the tax amount makes sense. 

 

I look forward to helping you further!

Greta | Shopify 
 - Was my reply helpful? Click Like to let me know! 
 - Was your question answered? Mark it as an Accepted Solution
 - To learn more visit the Shopify Help Center or the Shopify Blog

wyrdbyrd
Visitor
2 0 1

Thanks Greta! This is exactly what is happening. When I apply the rate to each line item and round individually, I get the same result. I'm probably doing something not common in that I like to have things round to a full dollar amount so that I don't need to deal with coins. Knowing how it works now, I can adjust.

Greta
Shopify Staff
1167 122 148

Amazing! Thank you for the update, @wyrdbyrd. I'm glad this can work for you!

 

Would you be open to sharing what products you're selling on your store, and if you have any sales/marketing goals you're looking to achieve? I'd be happy to share some resources and tips if you'd like! 

 

Thanks again. 

Greta | Shopify 
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 - Was your question answered? Mark it as an Accepted Solution
 - To learn more visit the Shopify Help Center or the Shopify Blog

Greta
Shopify Staff
1167 122 148

Hi there, @Watson43!

 

You can definitely use a calculator to verify that the taxes being charged on your orders are correct. To do this you'll want to multiply each product price by the tax rate, round the results, and then add these subtotals together to arrive at the total tax amount of the order. You can find an example of the calculation in this help document!

 

Please let me know if you have any other questions. 

Greta | Shopify 
 - Was my reply helpful? Click Like to let me know! 
 - Was your question answered? Mark it as an Accepted Solution
 - To learn more visit the Shopify Help Center or the Shopify Blog

jimmylwoz
Visitor
1 0 0

Here are a few things you can do to correct the sales tax calculation in Shopify:

Check your tax rates. Make sure that the tax rate for Michigan is set to 6%. You can do this by going to Settings > Taxes and Duties > Taxes.
Check your rounding settings. Shopify uses a default rounding method of Up to Nearest Even Cent. This means that any amount below 0.5 cents will be rounded down, and any amount above 0.5 cents will be rounded up. You can change this rounding method by going to Settings > Taxes and Duties > Rounding.
Use a tax calculator. There are a number of online tax calculators that you can use to verify the sales tax calculation. This can be helpful if you're not sure whether the tax rate or rounding method is correct.
If you've checked all of these settings and the sales tax calculation is still incorrect, you can contact Shopify support for help.

Here are some additional tips for ensuring that your sales tax calculations are accurate:

Keep your tax rates up to date. Tax rates can change frequently, so it's important to check your rates regularly to make sure that they're accurate.
Use a tax calculator. As mentioned above, there are a number of online tax calculators that you can use to verify your sales tax calculations.
Be aware of local tax laws. Sales tax laws can vary from state to state and even city to city. Be sure to understand the local tax laws in the areas where you sell products to avoid any penalties.
I hope this helps!