Question: how are shipping costs taxed in your jurisdiction?

SimpleCart
#1

We have an open issue/feature request for SimpleCart to make it add taxes to the shipping costs. After doing a bit of research, it seems there are two possibilities for handling that VAT, at least for the Netherlands

  1. Add a standard 21% VAT to the shipping costs. In the Netherlands, 21% is the highest VAT rate, so the logic behind that is that it is a safe assumption that is easier to implement than 2.
  2. Calculate the VAT based on the VAT on each product. If you have two products with 6% VAT, and one product with 21% VAT, your shipping costs would be taxed at 6% for 2/3rds, and 21% for the remaining 1/3rd.

To give an example calculation of the second option with 2 6% products and 1 21% product, if the shipping costs are €9, the additional tax on that would be 6% on €6 (€0,36) and 21% on €3 (€0,63) for a total of €0,99 VAT on the shipping costs. With option 1 it would simply be 21% of 9, or €1,89.

While I’m thinking of implementing option 2 (though given the current SC release, option 1 would be a lot easier by simply specifying a VAT rate on the delivery method object), I want to make sure that it is indeed the expected behaviour in other countries and jurisdictions. Can anyone confirm this is also how it should work for their areas?

#2

AFIK, In the UK, if there’s VAT on the item, then there’s VAT on the delivery cost, so option 2 would be the most accurate method.

#3

As above, in the UK, if the item is subject to VAT then the delivery is too.

However, zero rated items do not have VAT applied to the shipping and neither do non-EU deliveries or EU businesses supplying a valid VAT number. Complicated!

#4

Yeah taxes are lovely :wink: That’s probably a fairly easy piece of logic to implement though compared to, say, US sales tax which differs per state, county and sometimes even city.

#5

hi mark !

in switzerland, there are 3 rates:

8% for most things
2.4% for food, beverage (but applied for restaurants,… when you sell them on a webshop, it’s 8%)
3.8% for nights in hotels

so 99% of time, for a webshop, it’s 8% and it’s applied also to shipping costs.
except if you are an hotel and sell rooms, it’s 8%.

you must pay VAT (as a seller i mean) when you make more than 100k a year.

#6

Hey Mark,

In Canada taxes vary by Province, so for example here in New Brunswick sales tax is a flat 13% applied to all products and shipping alike.

#7

Did this ever get resolved? I just was introduced to this issue as well.

#8

It was not. It came up again just this week for another customer too, they ended up adding shipping as a product so it would follow along the same rules as that.

#9

My solution: Since I have a dynamic shipping module that preselects from the available options, I was able to create a custom placeholder for the total including shipping. I used a similar method on my custom payment processor to add shipping tax to the price before charging. Finally, I created a preHook on the finalize order snippet that actually put the tax into the order totals.