Why is VAT incorrectly calculated when a VAT-exempt item is in the cart?

Accounting & Taxes
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Topic summary

Shopify cart VAT (Value Added Tax) calculation issues when VAT‑exempt items are present.

  • Issue 1: When a cart includes a VAT‑exempt product, Shopify sometimes removes VAT from the shipping cost, even if other cart items are VAT‑able. Shipping VAT should still apply when taxable items are present.

  • Issue 2: Total VAT sometimes calculates incorrectly if an exempt item is in the cart. In the provided example, expected VAT is £6.97 total (£5.18 on the “Skullcap” item and £1.79 on postage), but Shopify shows a different amount.

Evidence: A screenshot is attached and central to understanding the discrepancy.

Status: No solution or consensus provided; the poster is asking if others have experienced the same problems. Discussion remains open.

Summarized with AI on January 17. AI used: gpt-5.
1

Hi,

I have a problem with VAT on orders.

  1. If a cart includes a product which is exempt from VAT, Shopify is sometimes removing the VAT from the shipping cost. This occurs even if the cart also includes items which are subject to VAT.

  2. Sometimes if an item which is excempt from VAT is in the cart the total VAT amount is wrong - but I can’t see why. See the attached screenshot. The total VAT should be £6.97 (£5.18 from Skullcap, £1.79 on the postage).

Screenshot 2023-09-25 at 10.12.25.png
Screenshot 2023-09-25 at 10.12.25.png952×503 38.8 KB

Has anyone else had either of these problems?

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