Why is sales tax getting incorrectly updated on customer orders?

Accounting & Taxes
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Topic summary

Sales tax is being recalculated after checkout, removing or refunding local taxes (city/county) and reducing the customer charge, while Shopify fees are still assessed on the higher, pre-refund estimated tax. Issue appears tied to the new Shopify Tax rollout (reported starting early November; one POS-specific spike at 10 AM Dec 1).

Reported impacts by state:

  • AZ, NM, KS, CO, SC, IA, CA, MO, FL. Examples include AZ city-only food tax refunded; CO sales tax updated/refunded; KS undercollection; CA wrong jurisdiction; POS-only undercollection for one merchant.

Likely causes vary by case:

  • Shopify Tax using estimated tax at checkout, then “updating.”
  • Use tax vs. sales tax mismatch based on fulfillment location (e.g., MO use tax excludes county/special districts, causing shortfalls).
  • Product tax categories (e.g., FL “Digital Goods” are non-taxable, triggering refunds).
  • Address-level local option taxes (IA) show Shopify’s rates can match state address lookups.

Workarounds/updates:

  • Some merchants opted out to a different tax method and enabled correct tax locations, restoring prior behavior; others cannot due to requirements like Colorado Retail Delivery Fee (only supported by Shopify Tax).
  • Multiple tickets opened; Shopify staff advise contacting support with order examples. Screenshots were provided.

Status: Ongoing; no platform-wide fix announced. Key unresolved issues: accurate local tax collection and fee calculations on post-checkout adjustments.

Summarized with AI on December 20. AI used: gpt-5.
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So what i’ve found: “in Iowa”

In iowa i found on the department of revenue website a sales tax look up by address.
If I put in an address it will tell me if that address is subject to 1% local option tax or not. 2 houses that are blocks from each other in the same county can have different tax rates. 1 house will get the 1% tax the other will not per my states website. This matches up with what Shopify is charging or not charging for local sales tax.

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