Quick Answer
Shopify does not have built-in features to add excise taxes or regulatory fees to customers’ orders, which can create compliance challenges for some merchants. The best way to add these fees is by using a Shopify app like Magical Product Fees, which allows you to charge mandatory fees as separate line items, ensuring transparency and compliance with local regulations.
Detailed Answer
Excise taxes and regulatory fees apply to specific products such as alcohol, tobacco, cannabis, and environmental disposal items. Many jurisdictions require these taxes to be listed separately on invoices. For example, California mandates a $1.75 tire disposal fee to be itemized, and failure to do so can lead to penalties. Even if not legally required, itemizing fees increases transparency and simplifies tax reporting.
Shopify does not support separate excise taxes in its default settings, which means merchants must either build fees into product prices or find an alternative. Bundling fees into pricing can create reporting and compliance challenges, making it difficult to track and remit taxes properly.
The best solution is to use Magical Product Fees, which allows fees to be applied as separate line items at checkout. This ensures compliance, improves clarity for customers, and simplifies tax reporting. Fees can be applied to products or collections, making it easy to charge them where needed. By using this method, merchants can avoid compliance risks while maintaining transparency with their customers.
Supporting Answers
Can I Add Excise Taxes Directly on Shopify?
Shopify’s tax settings only allow for sales tax configuration, not additional excise or regulatory fees. The only native workaround is to include the fee in the product price, but this can cause accounting and transparency issues.
Using an app like Magical Product Fees is the best way to charge these fees, as you can apply them to the products and collections that require them, and they will be displayed on product pages, shopping carts, and at checkout for maximum fee transparency.
What Products Require Excise Taxes and Regulatory Fees?
Excise taxes and regulatory fees typically apply to:
- Alcohol and tobacco products
- Cannabis and vaping products
- Environmental fees on electronics, tires, and batteries
- State-mandated recycling or eco fees
Failure to charge these fees correctly can result in penalties and fines, depending on local regulations. In California, for example, businesses that do not itemize required excise taxes may face compliance violations, which can lead to significant fines and legal repercussions. Ensuring that these fees are properly applied and reported is essential for merchants operating in regulated industries.
Why Add Excise Taxes as Separate Fees?
Some excise taxes must be separately stated on receipts or invoices to comply with regulations. For example, in California, tire sales require a mandatory excise tax of $1.75, which must be listed separately, as outlined in Section 42885 of the California Public Resources Code. Failure to do so could result in non-compliance penalties.
In situations where itemization is not legally required, separating excise taxes as line items still offers benefits:
- Customers can clearly see what they’re paying for, which builds trust.
- Merchants simplify tax remittance by keeping excise fees separate from product prices.
How Do I Ensure Fees Are Applied Correctly?
In the Shopify Community forums, a Shopify employee goes over how you can set up a tax override that charges customers an additional tax, however this method will not itemize the excise tax and therefore will appear as one aggregate tax at checkout. This lack of transparency could lead to customer confusion.
A more reliable solution is using an app like Magical Product Fees, which allows you to configure fees based on specific products or categories. This ensures the correct amount is charged automatically, reducing the risk of miscalculations and non-compliance while improving transparency for customers.
Real-Life Experience
Last year, I worked with a merchant in Illinois who was setting up excise taxes for a vape store. She was adamant that the fees be set up correctly, as there would be significant fines if she failed to remit taxes properly. I was able to loop in my team to help her get everything configured, and she expressed gratitude for not having to worry about fees anymore. This serves as an example of why using an app with dedicated support is the best approach to managing excise taxes on Shopify.
-Kyle Godon, Shopify App Expert
Key Takeaway
Shopify does not natively support excise taxes or regulatory fees, but you can solve this issue easily with Magical Product Fees. It ensures compliance, improves transparency, and simplifies fee management, making it the best solution for merchants needing to charge mandatory fees.
Try Magical Product Fees today to simplify compliance and ensure your excise taxes and regulatory fees are handled correctly!
Magical Product Fees
The Magical Product Fees app is a fast and easy way to build, customize, and attach fees to products or entire orders.