How to Include Taxes in Product Prices on Shopify
By Sam Nguyen
Including taxes in your product prices on Shopify is essential, especially if you sell in regions with varying tax rules. This helps ensure customers see the correct price without surprises at checkout. In this guide, you’ll learn simple steps to set up taxes in your Shopify store. Let’s get started!
How To Include Taxes In Product Prices On Shopify: A Step-by-Step Guide
Step 1: Navigate to Shopify Admin
From your Shopify dashboard, locate and click “Settings” in the lower left-hand corner.
Step 2: Access Taxes Settings
In the Settings menu, click on “Taxes and Duties”.
Step 3: Global Tax Settings
- Scroll down to the Global Settings section.
- Check the box labeled “Include sales tax in product price and shipping rate” to ensure taxes are automatically included in the prices displayed on your product pages.
If you don’t include taxes in your prices, the customer sees the product price without tax at first. For example, if you list an item for $100 and your region has a 10% tax rate, the total price at checkout will be $110. The formula used to calculate this is:
Total = Product Price x (1 + Tax Rate)
So, $100 x 1.1 = $110.
On the other hand, if you choose to include taxes in the prices, the price customers see already includes the tax. If you want the total price to be $100, Shopify calculates the product and tax portion automatically. In this case, the tax portion is calculated using:
Tax = (Tax Rate x Price) / (1 + Tax Rate)
For example, with a 10% tax rate, the product portion of the price would be $90.91, and the tax portion would be $9.09.
Step 4: Save Changes
- Once you’ve selected it, click the “Save” button in the upper right corner to apply the settings.
Include or Exclude Tax Based on Customer’s Country
To fine-tune international customers’ tax settings, you can include or exclude taxes based on the customer’s country. Here’s how:
- Step 1: From your Shopify admin, go to “Settings” > “Markets.”
This feature is helpful if you sell internationally and need to adjust taxes depending on your customer’s country, such as the UK, where VAT is included in prices, or the US, where taxes are added at checkout.
- Step 2: Click on “Preferences.”
- Step 3: Toggle the settings to “Include or exclude taxes based on your customer’s country.” This is useful for sellers who operate in multiple countries where tax regulations differ, such as the UK (which includes VAT) or the US (which applies taxes at checkout).
How does this setting work?
When you activate this setting, customers in countries or regions with different tax rates will see prices that reflect their local tax rates.
For example, if you sell a product for $100 and the tax rate in the customer’s country is 20%, the price at checkout would be $109.09. If the customer is in a region where you’re not required to charge tax, the price at checkout would be $90.91.
Important considerations
Before you activate this setting, ensure you review the following considerations:
- This setting isn’t supported for stores on the Shopify Plus plan that use Avalara AvaTax.
- This setting isn’t supported for stores that use third-party apps that offer post-purchase upselling.
- Accelerated payment methods, such as Google Pay or Apple Pay, are only supported for merchants using Shopify Payments.
- Dynamic checkout buttons aren’t supported for use with this setting.
By following these steps and considering these factors, you can ensure that your Shopify store is set up to handle taxes correctly and provide a smooth checkout experience for your customers.
Final words
I hope you find this guide helpful in setting up taxes for your Shopify store. Including taxes in your product prices makes it easier for you and your customers. It ensures that prices are clear and there are no surprises at checkout. Now, you can confidently manage taxes and focus more on growing your business!
