Applying Taxes to Shipping Rates

Learn about tax and how to apply it to your sales.

If you have a Shopify store you might need to charge tax on your sales. You can set up Shopify to automatically handle most common sales tax calculations, and you can also set up tax overrides to address unique tax laws and situations.

I’ll show you how this works if you are using our Postcode Shipping app.

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How to apply tax to your Shipping Zones in Shopify
Make rates price Tax-inclusive
Charge tax on Shipping rates and make them rates tax-exclusive

How to apply tax to your Shipping Zones in Shopify

To add a tax to a country or region, first set up the Shipping Zones you need to apply tax to, in Shopify.

It’s important to remember that Shopify’s tax settings pull Shipping Zones from your Shopify settings, not the Shipping Zones you have setup within the Postcode Shipping app. If you’ve already created your Shipping Zones in the Postcode Shipping app, you’ll still need to create these Shipping Zones in Shopify.

To do that, follow our guide Setup your Shopify Shipping Zones and enable Postcode Shipping rates, then follow on with the instructions below.

Once you've set up your Shopify Shipping Zones, you can apply taxes to them:

In your Shopify admin, go to the Settings → Taxes and duties page.
Click the region you’d like to add tax to. Regions not yet set up will show dashes.


By default no tax is applied, click Reset to default tax rates.

Shopify will now use default tax rates, unless you choose to ‘Add a tax override’.

Hit Save if you manually change the tax rate or add an override.
Do this for any other Shipping Zones you need to add tax to.

Make Shipping rates tax-inclusive

In some countries it’s your legal obligation to include sales tax in the displayed prices for most types of merchandise, so it’s best practice to always display it. To enable this feature:

Scroll down to ‘Tax calculations’ and select 'All prices include tax’.
Click Save.

Charge tax on Shipping rates and make them rates tax-exclusive

You may set you shipping rates as taxable, and ensure the tax is added after the rate price configured in the app. Here's how:

In your Shopify admin, go to the Settings → Taxes and duties page.
Check the "Charge tax on shipping rates" checkbox and ensure the "All prices include tax" option is unchecked
Save your changes.


💡Any changes made to tax settings in the Shopify admin will only apply to new orders; existing orders won't be affected.

ⓘ Remember that tax on Shipping rates are driven by Shopify tax settings. To make sure you are charging your customers the correct sales tax rates, be sure to check the rules and regulations with your local tax authority or a tax accountant. Find out more about tax from Shopify Support.

Updated on: 21/02/2024