Why isn't tax calculated on shipping fees for California orders in Shopify?

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Just bringing this to public attention if it helps anyone narrow down a tax calculation problem, and to hopefully catch some attention from the backend developers of Shopify.

Problem: If you are using shopify tax engine, collecting taxes on orders from California and you have a default handling fee included for orders shipped to US, then taxes will not be calculated on the shipping fee and instead it will only be calculated for the total amount of the order (in other words, shipping rate is excluded from total tax calculation for the order). It should normally include shipping rate as well in the calculation.

Update from Shopify: They have acknowledged that this is a known issue and is supposed to be fixed by the team, however there is no ETA on when it will be fixed. See screenshot.


PS: For us, adding a shipping override OR using the Basic tax engine instead of shopify tax is not really an option because of our specific setup/requirement, but it might be for someone else. Hope this would get some momentum on a fix on this issue asap since its a pretty noticeable and serious one that's causing accounting problems in business. It's been two months since we noticed this bug and reported it.

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