Sales tax overcharge

Accounting & Taxes

Topic summary

A US-based merchant in Florida discovered Shopify was charging sales tax rates higher than their expected 7% (6% state + 1% county). The rates appeared to fluctuate between transactions.

Key Clarifications:

  • Florida is a destination-based tax state, meaning sales tax is calculated based on the buyer’s location, not the seller’s
  • Different Florida counties have varying discretionary sales surtaxes that Shopify Tax automatically applies
  • Sales tax applies to the combined total of product price and shipping costs, not just the product

Resolution:
The merchant’s confusion stemmed from two factors: not understanding destination-based taxation and not realizing shipping charges were included in the taxable amount. When shown the calculation breakdown ($22.25 total × 7% = $1.56), the issue was resolved. The merchant accepted this explanation and thanked the support representative.

A later comment mentioned UAE corporate tax but appears unrelated to the original Florida sales tax question.

Summarized with AI on November 2. AI used: claude-sonnet-4-5-20250929.
1

Hey guys,

I am based in US.

I just noticed that Shopify is charging a wrong sales tax rate on each transaction.

I have a physical nexus in FL and my state tax is 6% and my county is an additional 1%, so that’s 7% percent total per transaction. Instead Shopify is charging 10% !! Furthermore, this tax rate fluctuates based on how many products are purchased and the location of the purchaser.

Is that normal? Why doesn’t it charge strictly 7%? Is it possible to set the rate manually?

Thank you for your response.

2

Hi @Eugene_EU - Florida is a destination tax state, so it’ll be looking at the county/city taxes where your buyer is located. If you reach out to support with some example orders, we’d be happy to look into it for you.

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3

I appreciate your response!
Are you saying that my side don’t even matter and that only buyer side (buyer local rates) is considered at sales tax calculation?

4

Yup! Florida is a destination-based sales tax state. So if you live in Florida, collect sales tax at the sales tax rate of the address where you ship your product. Many Florida counties have a discretionary sales surtax (county tax) that applies to most transactions subject to the sales or use tax. The county surtax rate applies to a taxable item or service delivered into a county imposing a surtax. Shopify Tax handles all of that for you.

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5

Thank you for helping me with this Mcrawford.
I got this part but here’s what I don’t understand, when I put in my address on the checkout page Shopify is charging me 9.75% sales tax instead of 7% ( my location FL 6% + county 1%). Why is Shopify charging me 9.75% instead of 7%?
I included a screenshot of my checkout page, I hope you can see it:

Sales.jpg
Sales.jpg2360×1180 91.8 KB

6

Hi @Eugene_EU it is applying 7% on the total of both your product and the shipping.

$16 + $6.25 = $22.25
$22.25 * 7% = $1.5575

1 Like
7

:thinking:

I didn’t know it was applying to the total of product price and shipping charge. I can work with that.

Thank you very much for clarification Mcrawford!
Take care and Happy Halloween :ghost:

8

It’s concerning how sales tax overcharges can impact businesses, especially with the introduction of UAE corporate tax. Companies already have to navigate the complexities of corporate taxation, and additional overcharges on sales tax only add to their financial burden. Ensuring accurate tax compliance and minimizing errors is critical for maintaining profitability in such a competitive market. Addressing overcharges swiftly and effectively is not just about saving money but also about building trust and ensuring long-term sustainability.