Why is the tax calculation incorrect on my order?

[ridhi_jain]

Hello Shopify Community,

I'm just about to open my first shop and ran a test order to ensure everything was ok. The item I bought was Rs3050. In India, the tax on ethnic garment products is 12%. And I have ticked to include tax in order price so that the customer is charged Rs3050 and no more. The tax is split out on the contact info page but is showing as Rs172.64. However, 12% of Rs3050 is Rs366. 

Also If I try to untick the include tax in price option then Shopify calculates the correct tax i.e, Rs366, and adds it to Rs 3050 so the total amount becomes Rs3416. 

Thank you!

[Andrew]

Hi @ridhi_jain, 

Apologies for the delay and thanks for reaching out about this!

If you include taxes in your prices, then the tax is calculated by using the formula Tax = (Tax Rate X Price) / (1 + Tax Rate). You and your customers will still see the tax as a line item, even though no taxes appear to be added. The subtotal and total will be the same, but the amount of tax you need to remit for an order will also be indicated. 

It's important to note that there may be a discrepancy in the pennies when working with taxes included in the line_item price. This comes from the way the system applies rounding to pennies when calculating taxes included in product prices since calculations are mainly based on values with just 2 digits.

Could you please talk me through your current tax setup and how you've done that, please?