Shopify tax configuration after WooCommerce (2026)

Tax setup is one of the most important and least glamorous parts of a WooCommerce to Shopify migration. Getting it wrong means incorrect VAT on customer invoices, potential compliance issues, and confusing pricing displays. WooCommerce tax was configured through a combination of WooTax, Avalara AvaTax, or manual rate tables in WooCommerce settings. Shopify has its own approach — Shopify Tax (automatic calculation) or manual tax rate configuration — and the two platforms handle tax-inclusive pricing differently. This guide covers the UK and EU tax setup most relevant to British ecommerce stores.

Key differences: WooCommerce vs Shopify tax

Feature	WooCommerce	Shopify
Default tax inclusion	Configurable (prices include or exclude tax)	Prices entered ex-VAT by default; separate setting to show inc-VAT
UK VAT 20%	Manual rate entry or WooTax	Automatic if "Charge tax on this product" enabled + UK store
EU VAT (post-Brexit)	Plugin-dependent (Avalara, WooTax)	Shopify Tax or manual rates per country
Zero-rated products	WooCommerce "Zero rate" tax class	Uncheck "Charge tax on this product" per product
Product-level overrides	Tax class per product	Tax code per product (Shopify Tax) or manual override
Invoice generation	WooCommerce PDF Invoices plugin	Not native — requires Sufio, Avada, or OrderlyEmails app

UK VAT setup in Shopify

Basic UK VAT configuration

• Settings → Taxes and duties → United Kingdom → set to 20% (standard rate)
• Shopify automatically handles UK VAT for UK customers at standard 20%
• "Charge taxes on shipping" — enable if you charge VAT on shipping (UK VAT: if the shipped goods are standard-rated, the shipping charge is also standard-rated)
• "Include tax in prices" — enable this for UK B2C stores. UK consumer-facing prices must be displayed inclusive of VAT by law. Shopify stores the price ex-VAT internally and calculates VAT separately; this setting controls the displayed price.

Tax-inclusive pricing display

• WooCommerce: configurable per store whether catalogue prices are entered inc-VAT or ex-VAT
• Shopify: prices are entered ex-VAT in the admin. The "Include tax in prices" setting makes Shopify display the price+VAT total on the storefront, but the price in admin is always ex-VAT.
• Migration implication: if your WooCommerce store entered prices inc-VAT (e.g., £24.00 inc 20% VAT), you must divide by 1.2 when importing to Shopify to get the ex-VAT amount (£20.00). Shopify will then display £24.00 on the storefront with "Include tax in prices" enabled.
• CSV import: ensure all prices in your Shopify import CSV are ex-VAT amounts.

Zero-rated and reduced-rate products

UK VAT has three rates: 20% standard, 5% reduced, and 0% zero-rated. Common zero-rated items in ecommerce:

• Children's clothing and footwear: Zero-rated if genuinely for children (not adult sizes). Uncheck "Charge tax on this product" in Shopify.
• Food: Most food is zero-rated in the UK. Exceptions: confectionery, crisps, alcohol, restaurant meals — standard 20%.
• Books: Zero-rated. Physical books = 0%. Ebooks and audiobooks = 20% (digital services).
• Printed matter: Newspapers, magazines — generally 0% in UK.
• Medical devices and drugs: 0% for prescription drugs and certain medical devices.
• 5% reduced rate: Applies to women's sanitary products, children's car seats, residential energy. Set via Shopify Tax tax code or manual override.
• In Shopify: per-product tax rate override — Settings → Taxes → Override → add override for specific product tax code at the appropriate rate.

EU VAT post-Brexit

UK store selling to EU customers

• Post-Brexit: UK is no longer in EU VAT area. Sales from UK to EU customers are treated as exports.
• B2C EU sales (goods under €150): Customer should pay import VAT and duties on delivery. You can either: (a) declare this in your shipping terms (DDU — delivered duty unpaid, customer pays on arrival), or (b) register for IOSS (Import One Stop Shop) to collect EU VAT at checkout and remit quarterly.
• B2C EU sales (goods over €150): IOSS doesn't apply. Duties are collected by customs on arrival (DDU).
• IOSS in Shopify: Shopify Tax supports IOSS — if you have an IOSS registration number, enter it in tax settings. Shopify calculates the correct EU destination VAT rate at checkout and shows a total inclusive of EU VAT for IOSS-covered orders.
• B2B EU sales: Goods sold to EU VAT-registered businesses → export, customer accounts for reverse charge. No UK VAT charged. Mark these customers as tax-exempt or use zero-rate shipping to EU B2B customers.

Digital goods (EU VAT MOSS/OSS)

• Digital products (ebooks, software, downloadable files) sold to EU consumers: EU VAT applies at the buyer's country rate, not the seller's country rate.
• UK digital sellers to EU: must either register for EU OSS (One Stop Shop) or register for VAT in each EU country where sales exceed the threshold.
• Shopify Tax for digital goods: Shopify can apply the correct destination-country EU VAT rate for digital products sold to EU customers. Requires configuring your products with the "Digital services" tax code.
• Practical reality for small UK digital sellers: if total EU digital sales are below €10,000/year, you may be able to apply UK VAT to all EU digital sales under the micro-business threshold. Confirm with your accountant.

Shopify Tax (automatic calculation)

• Shopify Tax is Shopify's built-in tax calculation service — automatically determines the correct tax rate based on customer location and product type
• For UK-based stores selling in the UK: Shopify Tax handles standard rates automatically. You configure product tax codes (standard, zero-rated, reduced) and Shopify calculates the rest.
• For US-based stores: Shopify Tax handles US sales tax by state automatically — significant reduction in compliance burden vs WooCommerce manual tax tables.
• Cost: Shopify Tax has a usage-based fee for US orders above a threshold (0.35% of US sales above $100k/year as of 2026). UK/EU calculation is included.
• Alternative: Avalara AvaTax or TaxJar integrations via apps for more complex international tax scenarios.

VAT number display at checkout

• UK B2B customers often want to enter their VAT number at checkout for their invoices
• Shopify doesn't collect VAT numbers natively at checkout — requires an app or checkout UI extension
• Sufio: Collects VAT number at checkout, includes it on the generated invoice PDF. Popular for EU VAT compliance.
• Avada Tax: Validates EU VAT numbers and auto-applies tax exemption for verified EU businesses at checkout.
• Checkout extensibility (Shopify Plus): if on Plus, use Checkout UI Extensions to add a VAT number field natively in the checkout flow.

Shopify tax migration checklist

• Confirm your store's pricing strategy: are prices entered inc-VAT or ex-VAT? Adjust import CSV accordingly.
• Enable "Include tax in prices" for UK B2C stores (legal requirement to show inc-VAT prices to consumers)
• Set UK VAT rate to 20% in Shopify tax settings
• Enable "Charge taxes on shipping" if applicable
• Identify all zero-rated and reduced-rate products; disable "Charge tax" per product or configure tax code overrides
• Configure EU VAT / IOSS settings if selling to EU consumers
• Configure digital goods tax code for downloadable products
• Install invoice generation app (Sufio or Avada) — Shopify does not generate VAT invoices natively
• Test: UK order → correct 20% VAT on standard products → zero rate on zero-rated products → VAT invoice generated correctly
• Test: EU order → correct EU destination country VAT rate applied (if using IOSS)

The tax-inclusive pricing migration is the most error-prone part of the WooCommerce to Shopify tax setup for UK stores. WooCommerce shops commonly entered prices inclusive of VAT (the price the customer pays), while Shopify expects prices to be entered exclusive of VAT. If you import a product at £24.00 thinking it's the ex-VAT price, but it was actually your inc-VAT WooCommerce price, Shopify will add 20% VAT and display £28.80 to customers — a significant pricing error. Before running your import, check your WooCommerce tax settings to confirm whether your existing prices are stored inc-VAT or ex-VAT, and run the appropriate conversion on your import CSV. This one check prevents incorrect pricing from going live on day one of the new store.