Draft Orders - Tax Exempt - Tax Not Being Deducted

[Max1957]

My site correctly shows tax free prices at checkout when the customer enters a delivery region that has been set up not to collect taxes.  That all seems to work fine.  HOWEVER, when I create a draft order for an existing customer in a tax free region, the Draft Order shows the product price including tax, even if I have flagged the customer as tax exempt.  Any help gratefully appreciated

[Elias]

Hey, @Max1957.

Elias here with Shopify Support. Thanks for reaching out.

When creating a draft order, the tax is determined based on the customer profile and shipping address. However, if you start adding items to the draft order prior to entering the customer profile or shipping address, the draft order may sometimes default to your location (eg. local order) and apply local taxes. However, this should change once you add the customer profile and shipping address to the order, and if the tax does not recalculate - You can also remove the taxes manually. That being said, from my personal experiences, I've had more success with applying the correct taxes to draft orders by adding the customer profile and shipping address before adding any items to the order.

Let me know if this helps you get the taxes sorted on your draft order?

[Max1957]

Elias,

Many thanks for getting back to me. I was waiting until I had to do a draft order for an overseas customer, which was last night, and again it didnt work.  This is a real problem for me.  Any more help would be greatfully appreciated.  The tax settings 'All Prices include tax', 'Include or Exclude tax based on your customers country'; and Charge Tax on Shipping, are all checked, and as I said before, for normal orders everything is working fine.  It is only a problem with draft orders

[Elias]

Hey, @Max1957.

Thank you for clarifying! 

I'm unable to confirm where the issue is, as we're unable to provide account-specific support via Community Forums. However, our Support team will be happy to continue assisting you through live chat, email, or callback. To create a support request, please visit Shopify Help Center and log in to your account. From there, simply make a search and a button to get support will appear under the relevant resources shared by the search results. 

It's important to note that the callback option may sometimes be unavailable due to a higher volume of support requests; however, our Support team can also help you through live chat, which is always available 24/7.  

I hope this points you in the right direction to get help with your draft orders! If you have any other questions for me, please don't hesitate to let me know! 

[Max1957]

Elias, many thanks, but for now this is the least of my problems as since Friday 12 March the way that Shopify is handling taxes has changed and now everything is messed up.  See other posts on that subject from lost of other shop owners

[Elias]

Hey, @Max1957.

That's no problem at all!

Sorry to hear that you're experiencing some issues with your store. I've taken a look at our changelog and I'm not seeing any recent changes with how taxes are handled in our changelog. That said, I'd be happy to take a closer look - Can you share some of the other posts you've mentioned?

Also, as tax settings may need account-specific support, have you tried reaching out to our Support team through our Help Center?

[Max1957]

Elias,

Many thanks.  This is the problem that I was talking about, which now seems to be fixed although Shopify is now handling tax differently than it did last Friday..

Re: Urgent issue regarding sales tax - Shopify is behaving incorrectly suddenly 

[Elias]

Hey, @Max1957.

Thank you for following up!

I'm glad to hear that the issue has been resolved. I've also taken a look at the forum thread you've shared, and it does look like a separate issue from this thread. Nevertheless, I was able to find more information about the changes for the new EU VAT rules coming in July 2021, or if you prefer a video instead - New VAT e-commerce rules - Online sellers.

If you have any other questions on this topic, don't hesitate to let me know!

[Kokogivre]

Hi Elias, 

Just to confirm that I have exactly the same issue. 

When someone is purchasing online via checkout, all works fine. However, when I create a draft on the behalf of the client, the price of product is "tax included" whereas it should not be the case, even if I already put the customer name , shipping address before adding a product. 

Only way to avoid overcharging clients where tax is exempt is to put a manual discount each time on the draft order. 

Can you please fix that issue? 

[Elias]

Hi, @Kokogivre.

Thank you for joining the thread!

It sounds like you may have All prices include tax enabled in your Tax settings ('Settings > Taxes'), which will automatically include the tax in your draft orders. Just to confirm, do you have this setting turned on?

If so, then this would be an expected behaviour, as our guide does indicate that "if you set a customer to be tax exempt, but you use tax-included pricing, then the customer will still be charged the full listed product price." In short, if you are including taxes in your product prices, then I'm afraid this would be something that you'd need to adjust when exempting taxes from draft orders. While this isn't considered an issue, as its how the system is designed to capture taxes included in the product prices. However, I'd be happy to share your feedback with our developers for future considerations. 

If you need further assistance with your tax settings, then we'll need to take a closer look at your account in order to assist you. While we’re not able to provide account-specific support via the Shopify Community at this time, our Support team would be happy to continue assisting you through live chat, email, or callback. Please visit the Shopify Help Center and log in to your account to create a support request.

Since the tax settings works fine for your Online store, do you often need to exempt taxes on draft orders and why?

[BSSCommerce2]

Hi, I come from BSS Commerce, we have many B2B Apps like https://apps.shopify.com/b2b-solution-custom-pricing

This problem happens too much with Draft Order. Steps:

1. Customers login (this customer is tax-exempt
2. Add to cart
3. Checkout. Tax is not exempt (although we checked the return API, Shopify set True on Tax Exempt)

This case is very important to B2B Customers
Shopify checkout default order works well, the problem happens with Draft Order

I think that this is the CORE bug from Shopify

[ThomasBorowski]

Shopify recently changed the way tax calculation works at checkout. If you set the checkbox "Include or exclude tax based on your customer's country" in tax settings, Shopify will deduct VAT at checkout for customers that are not taxable according to their country, even if you're using VAT-inclusive prices. Previously Shopify only set the tax amount to zero but didn't actually deduct the amount from the total, effectively meaning the total was the same with and without VAT.

However, this doesn't extend to customers who are set to tax exempt via the respective checkbox in the customer's tax settings. So if you're using VAT-inclusive prices and a logged-in customer who is marked as being tax-exempt goes to checkout, the customer will get the same prices as if he were not tax-exempt unless he is also from a non-taxable country. The tax-exempt flag does not cause the VAT to be deducted in this case, the VAT amount just changes to zero and prices stay the same.

Why Shopify chose this solution I don't know, it doesn't make much sense from a user perspective. So if you want tax-exempt customers to pay ex-VAT prices there's probably no other option than to switch to prices that don't include taxes. But if you have to show VAT-inclusive prices in the store (i. e. your an EU store that sells to consumers), you would have to modify the theme to calculate VAT-inclusive prices, which is more or less impossible now that the applicable VAT rate is determined by the customer's country (which you don't know before they check out) rather than your store's country (as it used to be until the VAT reform that came into effect on July 1, 2021).

[BSSCommerce2]

Thank you for your valuable answer.

But this problem just exists on Shopify Draft Order

I tried many ways to send GraphQL API to let Shopify check whether the customer is tax-exempt

You can see on this draft order, customer is set "tax-exempt" but no tax is deducted from Total

[ThomasBorowski]

It's not just an issue with the draft orders, the issue is that the tax-exempt flag on the customer isn't applied at checkout to deduct taxes from the total if prices are set to include taxes. It's the same if a customer set to be tax-exempt goes to the checkout from the cart.

[Elias]

Hi, @BSSCommerce2.

Thank you for joining the thread!

I understand that the tax exempt isn't being deducted for your draft orders. While it looks like you haven't selected a customer before putting the draft together in the first set of screenshots, I was able to replicate the problem in test store. However, I've also found that by adding the customer details to the draft order first allowed the draft to calculate the tax more accurately. Though I can't explain why this happens, I can confirm that the system can only calculate the taxes after the customer information has been entered - without this, the system will default the tax using the local tax rates. 

Can you confirm if the tax calculates properly if you add the customer details first on your end?

[BSSCommerce2]

Thank you for your reply

Regarding your questions, I have added Customer Detail to the draft order

I am trying another solution:

1) Creating Draft Order

2) Using Draft Order API Update to add customer detail into this one

We will comment the results after testing done

[BSSCommerce2]

Can't do the solution I mentioned

Please check the screencast to see the error

[Elias]

Hey, @BSSCommerce2.

Thank you for following up!

I'm unable to help with API-related issues, as I am not a developer. However, I'd recommend posting these questions to our Shopify APIs and SDKs board, so that someone from our developing team can assist you.

That being said, did you get a chance to test adding the customer details before building the draft order?

[BSSCommerce2]

Hi Elisas,

I have tested adding the customer details before building the draft order, it works when doing on Shopify Admin. But it can not work when I use GraphQL Api

[Elias]

Hi, @BSSCommerce2.

Glad to hear that it's working through the draft order in the admin! 

Have you posted the issues with GraphQL API in the Shopify APIs and SDKs forums?

Feel free to keep us posted!

[BSSCommerce2]

Thank you Elias for asking. I asked on Shopify SDK but received no response https://community.shopify.com/c/shopify-apis-and-sdks/problem-with-draft-order-api-adding-vat-exempt... 

[Den8]

2 years later this is still a problem. When using discount rules plug-ins that use the draft order method non Tax regions are charged Tax. Using coupon methods aren't helpful either as Shopify has the 'best offer' rule when applying multiple coupons, so will not let coupons be stacked.