Destination Sales Tax

[Amy47]

"Taxes are calculated based on certain circumstances and state. We use the shipping address zip code to determine which tax rate to apply unless there's only a billing address provided, then we use the billing address zip code."

I pulled the above from a Shopify answer to a previous post. My additional question is this: is Shopify able to collect sales tax based on the destination address, and not zip code? I am in South Dakota and we must collect sales tax on orders that have been shipped to a customer based on their delivery address. In South Dakota you can have two tax rates within one zip code, depending on whether or not the address is inside a municipality or not. For example zip code 57053 can have a 6.5% rate for state plus city, or just 4.5% for state. Customers who are checking out online in Shopify, and live outside a municipality should only be taxed 4.5%, but all are being taxed 6.5%. Being a very rural state almost every zip code in South Dakota has two possible rates, depending on the address. Did I miss a setting somewhere?

[Allan]

Hey, @Amy47!

Jason here from Shopify Support.

Great question. Tax can be tricky and thank you for letting us know this is happening in your store. It's likely you aren't alone in this.

The tax system in Shopify relies on the zip code to pull up the related city and county to determine the municipal rate collect the taxes. At the moment, it doesn't rely on the address. The system updates the rate on a monthly basis but there are times the discrepancies happen. In the case you've mentioned, I encourage you to check out our tax override feature. That being said, since our system does use zip code to determine the tax, the override feature can only be used on a county or city level. Once you have the override set up, don't forget to do test orders to make sure the new settings are reflecting the correct rates for both destinations in question.

Just in case if the override feature doesn't meet your needs, there are three possible solutions:

1. If the sales volume from this zip code isn't particularly high, process the needed refunds for the customers and explain to them that it's our tax system that can't detect tax exemption at the address level. This solution is the lowest cost and requires no additional setting adjustments. It does, though, require you to be diligent while fulfilling the orders and check on the address based on your knowledge.
2. If the sales volume from this zip code is high and you don't want to go through orders manually, you can provide a government official document. In the body, it needs to state the current tax is different than what we're charging. Once you have the document ready, contact Shopify Support and the Support team can help you forward this information to our Tech team, who can help with the potential adjustment. Bear in mind that since this requires the team to set up a new rate, it may be some time before the correct rate to show up in your store. In the meantime, the only option is to proceed with option 1 or with an override.
3. If you're pressed with time and this is having a huge impact on your store, I recommend consulting with Shopify Experts. The developers will be able to take a look at your case and build unique tax customizations specifically for your business with a contracted fee.

I hope this information helps. Should you have any questions, don't hesitate to reply back here and I'd be happy to help out!

All the best,
Jason

[eCommAccountant]

Shopify can't handle this, you'd need either Avalara,  Taxjar or Taxify to calculate your sales tax based on geolocation NOT zip code like Shopify does. These apps are very expensive, hence the reason I do this myself for my eCommerce bookkeeping clients who are too small to be able to afford these additional costs. But if you've got deep pockets by all means add on the Avalara app to Shopify.

[Deadonit52]

Hey Shopify, we need the ability to be able to charge a flat custom tax rate on any sales within a given state, or else it will take two hours to do our sales tax report once a month.  

[TravelingTwin]

Does anyone know the best way to charge OTP tax by state (Other Tobacco Products)?  We have a tobacco store and have a license for SC, NC and FL.  Each state has it's own OTP price based on the tobacco purchased.  Can Shopify handle this or is another app needed?  

[SiobhanMcC]

Hi,

I as wondering how the Tax is applied in Europe, as there are no ZIP Codes, it will be by COUNTRY.

It seems that we are charging the tax based on the billing address COUNTRY, and not the shipping address.

Is there a way to change this?

Thanks,

Siobhán