If you’re using paid shipping methods in your online store, their costs are likely to be taxed.
By default, how tax on shipping is calculated is pre-set according to what’s considered the most commonly used schema in your country. You can adjust how shipping costs are taxed at checkout and choose the option that suits your business needs better. For example, if your legal advisor recommends you to do so.
You can switch between two shipping taxation options:
Shipping taxes depend on products in the shopping cart.
If all products in the cart have the same tax rate assigned to them, shipping will be taxed at that same rate. If products in the cart have different tax rates, tax on the shipping costs will be calculated proportionately to the product prices.
Shipping taxes do not depend on products in the shopping cart.
A fixed tax rate will be applied to shipping costs at checkout.
– If you use manual taxes in your store, all the tax rates you set to apply to both the order subtotal and shipping are used. Rates that apply only to the order subtotal will not be used to tax shipping.
– If you use automatic taxes — as well as if you don’t have any manual taxes created in your store — shipping costs are taxed according to the standard rate applicable in customer’s location.
To change your tax on shipping schema:
- From your store admin, go to Settings → Taxes & Invoices.
- Scroll down to Settings and find the Tax on shipping… block at the bottom.
- Click Edit and select the tax on shipping option you want to apply in your store:
- Click Save.
That’s it! Now, the tax on shipping option you chose will be applied to all the new orders in your store. Customers will see its breakdown in their shopping cart at checkout, in order invoices, as well as in tax invoices.