Why does my tax amount automatically refund on Shopify?

[pbyanonymous]

Hi there,

We are launching our store very soon and have a question about sales tax. Our company is registered in New York and has a license to charge customers for sales tax. We placed a test order on our store to ensure everything was working correctly come time of our release. Everything went smoothly at first, tax was calculated and tax was also collected. However, after placing the order, the tax amount was automatically refunded for the full amount. When checking the order on the Shopify admin side, a notification saying the following was visible (view image as well):

"Tax amount was updated from $11.54 USD to $0.00 USD." It then shows that we only paid $130.00 for the order even though originally it showed $141.54 on the checkout page.

Could someone please help and explain the reasoning behind this?

[seaks1031]

I've been having the same exact issue. I am out of Illinois and this week is the first time I've been experiencing this problem but its happening on multiple orders including a test one I processed. 

[Jag2023]

Yea I’m selling from New York. I have the same issue. Losing money once this tax quarter comes around. Might have to email them, came here thinking someone would’ve responded

[Honor_Printing]

I was having this same issue this week where the sales tax was being refunded back to the customer without my knowing about it. The solution for me was to make sure the product was setup as a "shipping" product and not a "digital" product as the digital products were not collecting sales tax (well, they were collecting it but then refunding it at my expense). My items for sale were apparel (t-shirts/hoodies) so I had to go into each variant (size) of my product and check the box for "shipping" at the very bottom and then save it each time. That seems to have done the trick for me.  The pic below has the area circled in red that I had to check. Again, this has to be done for each variant and saved. Hope this helps someone.

[Twoskip]

Hey Jag2023, have you resolved this issue? The below response by Honor_Printing didn't fix mine. Thanks

[Jag2023]

Hey yea so the idea was that they only return taxes where it wasn’t
applicable. So if u didn’t need to pay taxes on that sale they would return
it to the buyer.

[Twoskip]

Thanks for getting back! Okay, that makes sense. Just weird because it was collecting tax on these items up until a week ago. Maybe there was an update.

[Binsky]

Having the same issue here. It hasn't always been this way for me.

Have you gotten any new updates to this? 

I suppose it's just already stated, taxes are collected where applicable?

Thanks!

[Honor_Printing]

See below. I just posted about my experience with this same issue and what fixed it for me...

[Twoskip]

Hi Pbyanonymous, I too am in NY and am having the same issue. Have you resolved this yet? if so please shed some light on what you did to correct it!

[nwaPLASMA]

Im in arkansas and have the same issue randomly. Mostly on manually created orders. And I always select “shipping required”.  

[T112]

Same problem here. My variant does not show the option of "This product requires shipping". Seemingly, this option has been replaced with "This is a physical product". This option has been checked in my case. The sales tax was updated to 0.00 USD causing me some loss and headache. 

[nwaPLASMA]

After my original post below I finally got a hold of the tax department at Shopify and they were able to explain all of this order by order in a way that made sense. Here’s some of the info I got that helped me understand how this works. I had either neglected to set up an item as a physical item that required shipping or I just didn’t understand how the tax calculation worked. 

It is not really a refund, it is just how Shopify Tax shows corrections in taxes that were overestimated.
 
In this case:

• Our Basic Tax service overestimated taxes by 1%, or 37.50.
• This amount was authorized to your customers credit card. 
• When the rooftop accurate rate was applied at payment, this was rectified. The correct amout was collected from your customer, and the over-estimated amount shows as a refund on your payout and in the timeline. 
• No amount was actually refunded to your customer as the correct amount was collected at payment. It is currently the best way for our system to display what is happening on these orders. 

 
If you have any questions on the above, please let us know by replying here!
 
All the best,
Merchant Tax Support

Sorry! I totally missed that you were asking about another order. Lets take a look at order 1874.
 
This order is for an item that was set up as non-physical. We can tell this as at the top of the order it says 'Shipping, Not required.' and lower down on the order, there is no shipping line.
 
An order for non-physical items is seen as a digital sale by the system. Digital sales are non taxable in many states. 
 
Our Basic Tax service quoted the standard tax rate for the customer's billing address. Then Shopify Tax registered the digital sale at payment and removed taxes accordingly. 
 
I see your note on the order 'For local pickup, call, text, or email us.' In this case, please set up the product as physical, and use Local pickup for online orders to have these sales taxed correctly. 
 
If you have any questions on the above, please let us know by replying here!
 
All the best,
Merchant Tax Support