What’s New at Shopify?

Overview

With the Canadian tax holiday, Shopify has begun automatically zero-rating properly-categorized products on merchants’ behalf. In order to make tax collection simpler for merchants, we are now calculating shipping tax proportionally for orders with zero-rated items.

This means that for an order with zero-rated and normally-taxed products, tax on shipping will be charged at a blended rate, weighted by the line item quantity and tax rates in the order.

Only zero-rated or exempt items will affect the shipping tax rate. This only applies to GST, and you must be using registration-based taxes.

Here’s an example:

Before:

Product A: $10, 20% VAT

Product B: $30, 0% VAT

Shipping: $10

—

Shipping tax is charged at 20% for the full shipping.

• $10 Shipping x 20%= $2 tax

After:

Product A: $10, 20% VAT

Product B: $30, 0% VAT

Shipping: $10

—

Shipping tax is charged at a rate proportional to the quantity of line items, and considers the zero-rated tax..

• Product A rate: $10 x (1/2) x 20% = $1
  
• Product B rate: €10 x (1/2) x 0% = $0
  
• Shipping Tax rate: $1 + $0 = $1 tax

What's changing?

Starting on December 17th, 2024, Shopify will automatically proportionally tax shipping orders that have products with zero and nonzero tax rates.

This does not apply for manually-set tax rates: if your store is using Legacy Tax or overrides, these changes will not apply and you’ll need to handle taxes yourself.

What do you need to do?

1. Review your product categories and ensure they’re accurate.
   
2. Ensure you do not have manual overrides turned on for these categories, and are not using Legacy Tax.
   
3. That's it! We'll handle the tax calculations for the tax holiday and proportionally tax shipping, automatically.

Pro tip: Use the bulk editor to quickly review and update multiple products at once.

Learn more about eligible categories