Why Is Shopify Charging Taxes Incorrectly on My Store?
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Why Is Shopify Charging Taxes Incorrectly on My Store? [2025 Fix Guide]
If you're asking, “Why is Shopify charging taxes incorrectly on my store?”, you’re not alone.
Tax miscalculations can frustrate customers, trigger legal issues, and eat into profits.
In this 2025 guide, we'll explain:
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Why your Shopify store is charging incorrect taxes
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Common tax setup errors (manual & automatic)
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How to fix tax issues in Shopify step-by-step
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Shopify's tax engine updates for US, Canada, EU, and others
❗ Common Reasons Shopify Charges Wrong Taxes
1. ✅ Missing Store Location or Nexus Settings
Shopify calculates tax based on:
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Your store's physical location
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Where you have economic nexus (especially in the US)
If you haven’t correctly set up your shipping origins or tax registrations, Shopify can’t apply the right rates.
Fix: Go to Settings > Taxes and duties > Regions, and set up where you collect tax.
2. 🧾 You’re Using Manual Tax Overrides Improperly
Manual overrides are helpful, but dangerous if misused.
Some store owners:
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Add overrides that don’t match local laws
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Forget to update them for law changes
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Apply overrides globally by mistake
Fix: Remove overrides unless you’re sure they’re necessary. Let Shopify's automatic tax system handle it for supported countries.
3. 🌍 Shipping Address vs Billing Address Confusion
Shopify uses the shipping address to calculate taxes — not billing.
If customers ship to a tax-free region, no tax is charged, even if their billing address is taxable.
Fix: Communicate this clearly at checkout to avoid confusion.
4. 🔄 Products Not Marked as Taxable
Some merchants unknowingly uncheck “Charge tax on this product” for all products.
Fix:
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Go to any product in Products > Edit
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Ensure “Charge tax on this product” is ticked
You can bulk edit this for multiple products via the Shopify admin or a CSV import.
5. 🏢 Incorrect Customer Tax Settings (e.g., B2B)
If you’re selling to VAT-exempt B2B customers and Shopify is still charging them tax, you may need to:
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Tag them as “exempt”
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Use Shopify B2B tools to automatically adjust VAT settings
Fix: In the customer profile, update tax settings and exemption status.
🌎 Region-Specific Tax Issues in Shopify
🇺🇸 United States: Economic Nexus Issues
Shopify now supports automatic US tax calculation if you declare where you have a nexus.
Failing to add a nexus in key states results in:
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No tax being charged where it should
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Incorrect local/state tax splits
Fix:
Go to Settings > Taxes > United States and add your nexus states.
🇨🇦 Canada: GST/HST/PST Confusion
Canadian stores must charge different taxes per province.
If these aren’t set up correctly, Shopify may:
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Charge the wrong tax mix
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Miss province-specific taxes entirely
Fix: Use automatic tax settings for each province and double-check product category taxability.
🇪🇺 Europe: VAT Mismatch or OSS Issues
Shopify supports EU VAT and One-Stop Shop (OSS).
But misconfigured VAT IDs or country-specific rates lead to problems like:
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Charging VAT when you shouldn’t
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Not applying OSS rules to cross-border orders
Fix:
Add your VAT number under Settings > Taxes > Europe and enable OSS if eligible.
🧠 How to Fix Shopify Tax Problems (Step-by-Step)
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Go to Settings > Taxes and Duties
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Review each region where you collect tax
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Add proper tax registrations / VAT IDs
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Choose between manual or automatic tax settings
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Use Shopify’s tax category suggestions to optimize per-product tax treatment
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Bulk edit your products to make sure tax is enabled
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Test orders using different addresses (US, EU, Canada) to verify accuracy
🧩 Tools to Simplify Shopify Tax Management
If your tax setup is more complex (e.g., international B2B, subscriptions, digital goods), use tools like:
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Quaderno – Advanced VAT handling & tax compliance
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TaxJar – Automated US sales tax filing
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Avalara AvaTax – Real-time tax calculations & compliance
🔍 Frequently Asked Questions
Q: Why is Shopify not charging taxes on some products?
Likely because the product is not marked as taxable or the shipping address is in a tax-exempt region.
Q: Can Shopify calculate taxes automatically?
Yes – Shopify supports automated tax rates for the US, Canada, EU, UK, Australia, and others.
Q: Do I need to collect taxes from international customers?
Depends on your country’s laws and whether you’ve crossed a tax threshold (like the EU OSS threshold).
🔚 Final Thoughts: Stay Compliant and Profitable
Incorrect tax settings can cost you revenue or get you into legal trouble.
The good news? Shopify's tax engine is powerful — if set up properly.
👨💻 Need Help Setting Up Shopify Taxes?
At RootSyntax, we help merchants:
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Fix tax issues
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Implement region-specific tax logic
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Set up B2B exemptions or OSS
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Automate tax reporting with third-party tools
📩 Contact us to get your taxes handled right — and stay compliant worldwide.