Shopify winter 25 update category based taxation

[PK2023]

Hello everyone,

I think everyone has seen the winter 25 updates and what caught my eye instantly was the category based taxation that would solve Shopify's current problem of not recognizing different VAT rates within a country. 

We work in flower bulb industry which vat percentage in the netherlands is 9%. However when checking what is the VAT for our products which indeed have the category Plant and Flower bulbs the vat amount was still 21% at the check out....

Has the category based taxonomi not live yet, am I doing something wrong or is Shopify spreading fake news?

Thanks!

[steve_michael2]

Hi @PK2023 ,

Check the VAT Settings in Shopify

Shopify allows you to configure tax rates based on product types, but you need to ensure that the tax settings are correctly configured to apply the 9% VAT for your flower bulbs.

• Go to Settings > Taxes in your Shopify admin.
• Ensure that taxes are enabled for your store in the Netherlands.
• Verify that the correct tax rate is applied to the Netherlands, especially for products that fall into categories like "Plant and Flower bulbs."

2. Product Tax Classifications

You may need to manually assign the appropriate tax rate to the "Plant and Flower bulbs" products. Shopify has a feature that allows you to set tax rates based on product types, but the product's tax class needs to be explicitly defined.

• Go to Products and select a product (e.g., a flower bulb).
• Under Variants, look for the Tax Settings option.
• Ensure that the correct tax category (9% VAT for flower bulbs) is applied to the product.

3. Category-Based Taxonomy

Shopify's category-based tax functionality is indeed rolling out, but it may not be fully available to all stores yet, or it may require additional configuration to work as expected. Make sure that you've updated to the latest Shopify version and check if the feature is enabled for your store.

4. Tax Overrides

If Shopify's built-in settings are not automatically adjusting the VAT rate based on product category, you may need to create a tax override for specific product types.

• Navigate to Settings > Taxes > Tax Overrides.
• Set up an override for the "Plant and Flower bulbs" category and apply the 9% VAT manually if it's not being applied automatically.

5. Check Local Tax Rules

Make sure that the tax rules for the Netherlands have been set up properly. There might be a discrepancy between Shopify's default tax rules and your local requirements.

If the feature isn't fully rolled out or is not working as expected, it might be worth reaching out to Shopify support to confirm the status of the category-based taxation for your region.

If my reply is helpful, kindly click like and mark it as an accepted solution.
If you are happy with my help, you can help me buy a COFFEE
Thanks!

[PK2023]

Hello,Thank you for the reply. We are up to date with our store.

Step one: 

• Verify that the correct tax rate is applied to the Netherlands, especially for products that fall into categories like "Plant and Flower bulbs." <- there isn't an option to check the VAT rate just this:
   

   

Step two: it is not possible in our store. When I am at a product page there is no such thing as tax settings. Could it be that we do not have variants but just the product?

Step 4:  override doesn't work for us since we cannot set tax exempt customers since the returned VAT is 21% regardless of the override.

Step 5: This is the government set taxation (9%) for our products which has been verified multiple times

[shubify]

Hi PK2023, hope I can help. I looked through your storefront and saw that you have two overrides that are probably conflicting with Shopify Tax's category-based product rates.
Your Netherlands product override is at 9%, and so is your shipping override. You have some overrides at 21%, as well- these conflict with Shopify Tax's calculations and take precedence over them.
If you turn off these overrides and still don't see a 9% rate, this is probably an issue on our end that we will swiftly fix. Please message shub.gaur@shopify.com if you still see issues!

[PK2023]

Hi,

the override are because of this issue 🙂 However I created a test product which doesn't have the override and the category is Flower bulbs and still Shopify pushes 21% VAT rate 🙂

[steve_michael2]

It sounds like your Shopify store is applying a VAT rate override globally or incorrectly associating tax rules with certain products/categories. Here's how to troubleshoot and resolve this:

1. Check Tax Overrides in Shopify Settings

• Go to Settings > Taxes and Duties in your Shopify admin.
• Look for any Tax overrides that might be applying a 21% VAT to all products or to specific categories.
• If there's an override for the "Flower bulbs" category or similar, adjust or remove it.

2. Product Tax Settings

• Open the test product in Products.
• Scroll to the Pricing section.
• Ensure that Charge taxes on this product is checked, and the product is correctly tagged or categorized.

3. Tax Rules by Region

• Confirm that the VAT rates for your store's region are configured correctly:
  • In Settings > Taxes and Duties, check the default VAT rate for your country.
  • Verify that there's no global rule enforcing a 21% VAT across all product categories.

4. Check Shopify's Tax Categories

• Shopify has introduced tax categories for better compliance. Flower bulbs might not have a specific reduced VAT category assigned. To ensure correct VAT rates:
  • Assign the correct HS Code or Tax Code to the product.
  • If "Flower bulbs" have a reduced VAT rate in your country, make sure Shopify supports this distinction. You might need to contact Shopify support if the tax category is unavailable.

5. Contact Shopify Support

If none of the above resolves the issue, it might be a backend configuration problem. Shopify support can:

• Clarify why the 21% VAT rate is being applied.
• Adjust or help you create specific tax rules for the "Flower bulbs" category.

Let me know if you'd like assistance walking through any of these steps or debugging further! 😊

[PK2023]

Hello, thank you for your in depth answer.

I have already contacted Shopify Support more times than I would have wanted in this matter and hey told that they do not have any information about category based taxes and cannot provide any information about them. They just tell time after time to contact local tax authorities to confirm the correct tax rate... which we have since we have been in a business for decades. There is not much help from them when they refuse to tell anything about tax calculations.

I have tax overrides based on collections and my test product is not in them. Product tax settings are just like you mentioned as well as the Tax codes. Still for the test product the vat rate is 21% instead of the 9% which it should be (also by law).

I am getting a bit desparate.

[shubify]

Hi PK. Just checked with our team. Sadly, this category is currently. not supported. We're working on a fix here, but in the meantime, you'll need to use product overrides. Apologies for the disappointing news- we'll follow up with you as soon as this is fixed. 

[PK2023]

Hi, Any updates on this matter? Also I have been contacting you couple times regarding the shipping VAT error as well after the Winter '25 update. The shipping VAT (which is 9% with override) from a shipping of 8.95€ is over 9€ at the check out. How can the Shipping tax be more than the actual shipping?!?