Issue with Tax Calculation on Shipping Costs after Migrating from WooCommerce to Shopify

Accounting & Taxes
, ,

Topic summary

A merchant migrated from WooCommerce to Shopify and discovered incorrect VAT calculations on shipping costs. The store displays prices including VAT across different countries (Country A: 5%, Country B: 10%) with varying product tax rates (food vs. non-food).

The Problem:

  • WooCommerce treats the €4.95 flat shipping fee as a net price, adding VAT on top based on cart products
  • Shopify treats the same fee as gross (tax-inclusive), resulting in lower shipping charges (€4.63 vs €4.95) and incorrect total VAT amounts
  • Example: WooCommerce calculates €28.85 total with €1.88 VAT; Shopify shows €28.53 total with €2.30 VAT

Proposed Solutions & Responses:

  • One user suggests checking Settings > Taxes and Duties to enable “Charge taxes on shipping” and ensuring the flat rate is set as net in Shipping and Delivery settings
  • However, another user reports this is a known, unresolved issue with Shopify’s tax engine, with a ticket filed over a year ago and no expected fix
  • A third merchant confirms experiencing the same problem with undercalculated taxes and lack of support

Status: The issue remains unresolved with conflicting information about whether a configuration fix exists.

Summarized with AI on October 29. AI used: claude-sonnet-4-5-20250929.
1

I recently migrated my store from WooCommerce to Shopify and encountered an issue with VAT on shipping costs.

My store displays product prices including VAT, ensuring that customers in Country A and Country B always see the same price. However, VAT rates differ, for example: 5% in Country A and 10% in Country B. Additionally, I sell products with different tax rates (e.g., food vs. non-food items), and Shopify correctly assigns VAT based on product type.

The issue arises with shipping costs. In WooCommerce, my flat-rate shipping fee is treated as a net price, and VAT is added on top based on the tax rates of the purchased products. This ensures correct VAT calculation.

For example, in WooCommerce, the calculation is as follows:

  • Subtotal: €23.90
  • Shipping: €4.95
  • Total: €28.85
  • Includes €1.88 reduced VAT

However, in Shopify, the same order is calculated incorrectly:

  • Subtotal: €23.90
  • Shipping: €4.63
  • Total: €28.53
  • Includes €2.30 VAT

It seems that Shopify is treating my shipping fee as a gross amount instead of a net amount before applying VAT. How can I configure Shopify to recognize my flat shipping fee as a net price and apply the correct VAT on top, based on the tax rate of the products in the order?

Any guidance would be greatly appreciated!

2

Hi @HendrikJa

It sounds like Shopify’s default behavior is treating your flat shipping rate as a gross (tax-inclusive) amount, unlike WooCommerce’s net (tax-exclusive) approach, which is throwing off your calculations.

To fix this, in your Shopify admin go to Settings > Taxes and Duties, under “Shipping,” and ensure “Charge taxes on shipping” is enabled and then, in Settings > Shipping and Delivery, have your flat rate set as a net value (i.e., €4.95 VAT excluded). Shopify should then automatically charge the appropriate VAT based on the product tax rates within the cart, following your Country A (5%) and Country B (10%) setting. Double-check your tax settings for each country as well, ensuring product-specific rates (food vs. non-food) are correctly assigned.

2 Likes
3

HI Hendrik

This is known issue without anyway to resolve it. We placed a ticket with “Tax team” a long time ago (over a year). The issue seems to relate to legacy problems of the Shopify tax engine and they most probably will nether fix it :disappointed_face:

4

Same problem Absolutely no support they just don’t care. They are calculating the tax incorrectly Too low and I am on the hook for the taxes.