Tax overrides and exemptions (2024)

Taxes are calculated automatically within Shopify, but you can override these tax rates for greater control over the taxes that you charge. Use overrides if you need to do any of the following:

• control how much tax you charge for a particular product
• handle tax exceptions and exemptions
• specify unique tax rates for shipping destinations
• specify unique tax rates for tax-exempt customers.

For example, you can specify overrides for state tax exemptions in the United States, provincial tax exemptions in Canada, or VAT exemptions in the European Union or the United Kingdom.

Overrides apply to online sales and to Shopify POS sales.

To set up a tax override, create a manual collection for the products that are tax exempt, and then apply the override to that collection.

If you don't need to charge sales tax, then you can create overrides and set the tax rates to 0%. Always check with a local tax authority to make sure that you are charging your customers the correct tax rates.

Set a product to be exempt from sales tax

If you have just a few products that are exempt from tax, then you can prevent any taxes from applying to these products individually.

Steps:

1. In your Shopify admin, click Products, and then click the name of the product.

2. In the Pricing section, uncheck Charge taxes on this product.

3. Click Save.

Create a manual collection of products that need a tax override

If you have a group of products that all need the same tax override, then you can create a collection that contains the products, and then apply the override to the collection.

You can make tax override collections hidden so that the collection isn't visible to your customers. After you apply a tax override to the collection, any products that you add to the collection will become tax exempt everywhere in your store, whether the collection is hidden or not.

Steps:

1. From your Shopify admin, go to Products > Collections.

2. Click Create collection, and then enter a name for it.

3. Under Collection type, select Manual

4. If you want to hide the collection from any of your active sales channels, then click Manage in the Collection availability section to deselect the check box beside the name of the sales channel. Learn more about sales channel availability.

5. Click Save.

6. In the Products section, click Browse.

7. Select the products that you want to add to the collection, and then click Done.

After you add all the products that need a tax override to the collection, you can apply a tax override to the collection.

Product categories

Product categories are labels that are assigned to products or to collections of products. For merchants that sell to customers in the United States, they indicate the tax obligations and exemptions that customers have when they purchase those particular products.

Using product categories increases the accuracy of US tax calculations, and reduces the need for tax overrides. Product categories are selected from Shopify's Standard Product Taxonomy, which is a predefined and standardized list. To learn more, refer to Product categories.

If you set a product category for a product that has an override in place, then the override takes precedence over product category tax calculations. Consider removing any product tax overrides that conflict with your product categories. However, if you're aware of tax rules that aren't calculated by product categories, then keep your product tax overrides.

Override the taxes on a collection or on shipping charges

You can specify unique tax rates for a collection of products or on shipping charges.

The percentage value that you enter is the amount that will be collected. It's not the amount exempted.

If you create the tax override for the United States, then you need to select the state to apply the tax override to.

Steps:

Set up tax-exempt customers

On the Customers page of your Shopify admin, you can set a customer to be fully tax exempt.

Tax exempt customers are not charged any tax when they complete a checkout. These customers need to check out using the same email address as the one listed on their customer account.

Steps:

1. From your Shopify admin, go to Customers.

2. Find the customer you want to exempt from all taxes, and then click their name.

3. In the Tax settings section, click Manage.

4. Uncheck Collect tax.

5. Click Save.

Built-in tax exemptions

Shopify has built-in tax overrides for two specific cases:

• US merchants selling clothing in New York, New Jersey, Massachusetts, and Rhode Island
• Canadian merchants selling vapor products in British Columbia and Saskatchewan

Clothing tax rules in US states

The following states have tax exemptions for certain clothing products:

• New York: In some jurisdictions, clothing products, footwear products, and items used to repair clothing products with an individual price under $110 are exempt from state sales tax. For example, two items with a combined price of $200 will each be exempt from sales tax, but one item with an individual price of $110 will be subject to sales tax. This exemption also applies to the local tax rates of the following jurisdictions:
  • Bronx
  • Brooklyn
  • Chautauqua
  • Chenango (except the city of Norwich)
  • Columbia
  • Delaware
  • Dutchess County
  • Greene
  • Hamilton
  • Manhattan
  • Queens
  • Staten Island
  • Tioga
• New Jersey: Most clothing and footwear products are exempt from state sales tax. There are no price limits for this exemption.
• Massachusetts: Clothing products with a price under $175 are exempt from state sales tax, and clothing products with a price of over $175 will collect tax only on the amount that their price is over $175. For example, an item of clothing with a price of $200 will be taxed on $25 because the first $175 is not taxable.
• Rhode Island: Clothing and footwear products with an individual price of $250 or less are exempt from state sales tax, and only the incremental amount above $250 is subject to sales tax. For example, if a suit costs $275, then the tax applies only to $25.

For Shopify to calculate the correct tax rates, your store must be set up to collect sales tax in the state, and you need to create a collection for the applicable clothing products with a title of tax:clothing.

Steps:

1. From your Shopify admin, go to Products > Collections.

2. Click Create collection.

3. In Title, enter tax:clothing in lowercase letters.

4. Under Collection type, select Manual

5. Add products to the collection manually.

6. Optional: To hide the collection from any of your active sales channels, change the collection's availability.

7. Save your collection.

After you save the tax:clothing collection, the applicable clothing rule will be applied automatically, and the correct amount of tax will be collected for the products in that collection.

Use the tax:clothing collection only for the states of New York, Massachusetts, and Rhode Island. If another clothing exemption applies in your jurisdiction, use other tax override methods or mark your products as nontaxable in the Pricing section of the product page.

British Columbia vapor product tax rules

British Columbia applies a higher PST rate to vapor products. In addition, GST is compounded on the PST. For Shopify to calculate the correct tax rates, you need to create a collection for the applicable vapor products with the title tax:eliquid_vaporizers.

For more information about the PST rate for vapor products, refer to the Government of British Columbia website.

Before you begin

For the override to apply correctly, you need to set up your tax accounts for Canada and British Columbia first.

Steps:

1. From your Shopify admin, go to Products > Collections.

2. Click Create collection.

3. In Title, enter tax:eliquid_vaporizers in lowercase letters.

4. Under Collection type, select Manual

5. Add products to the collection manually.

6. Optional: To hide the collection from any of your active sales channels, change the collection's availability.

7. Save your collection.

After you save the tax:eliquid_vaporizers collection, the applicable sales taxes are applied automatically, and the correct amount of tax will be collected for the products in that collection.

Saskatchewan vapor product tax rules

Saskatchewan applies a Vapour Products Tax, or VPT, to vapor products. For Shopify to calculate the correct tax rates, you need to create a collection for the applicable vapor products with the title tax:eliquid_vaporizers.

For more information about the VPT for vapor products, refer to the Government of Saskatchewan website.

Before you begin

For the override to apply correctly, you need to set up your tax accounts for Canada and Saskatchewan first.

Steps:

1. From your Shopify admin, go to Products > Collections.

2. Click Create collection.

3. In Title, enter tax:eliquid_vaporizers in lowercase letters.

4. Under Collection type, select Manual

5. Add products to the collection manually.

6. Optional: To hide the collection from any of your active sales channels, change the collection's availability.

7. Save your collection.

After you save the tax:eliquid_vaporizers collection, PST is no longer collected on products in the collection, and it is replaced by VST.

Set a 0% tax rate for most of your products

If most or all of your products are exempt from sales tax and you are in a country that has both federal tax and regional taxes, then you can override the defaults to 0% in the Base taxes section.

However, for your products that are taxable, you will need to add those products to a collection, and then create a tax override for that collection.

Steps