Mastering Shopify Taxes: A Complete Guide for B2C and B2B Success

Handling taxes in Shopify for both B2C and B2B businesses involves careful setup to comply with local and international tax regulations. Here's a detailed guide to help you optimize tax configuration in Shopify, ensuring seamless transactions for your clients and customers.

Setting up taxes in Shopify

Configuring VAT for markets
For stores operating in regions like the European Union, setting up VAT is essential. Here’s how:

• Input your VAT number: Begin by entering your VAT number in the Taxes and Duties section of Settings in your Shopify admin.

• Enable tax automation: Once your VAT is entered, Shopify automatically calculates tax rates based on the countries in your chosen market (e.g., EU countries). These rates are applied directly to invoices.

• Customize specific tax rates: If a country requires non-standard tax rates, you can override the default rates manually. These custom rates will take precedence over Shopify’s automatic calculations, ensuring accurate invoicing.

Why this matters:
This setup is especially important for businesses selling niche products like medicines, supplements, and similar items, where tax rates can vary based on product type and country. For instance, in the US, some states apply different tax rates to clothing or digital goods. That’s why it’s crucial to review the tax regulations for each product in every target country before entering a new market.

For instance, one of our partners, a supplements store, has implemented its own tax settings in several countries, like Belgium and the Netherlands.

VAT ID validation for B2B

For B2B sellers, VAT ID validation ensures compliance and streamlines tax exemptions for eligible clients. Shopify doesn’t offer native VAT validation, but third-party apps can fill this gap.

Recommended apps for VAT validation

1. B2B Handsfree

Great for EU-based sellers, this app provides a customizable B2B registration form with real-time EU VAT ID verification, along with fields for company details like name, address, and phone.  

Top benefits:

• Real-time EU VAT ID verification.
• Automates tax exemption for qualifying foreign B2B customers.
• Includes VAT ID details on invoices using popular tools like Order Printer and Sufio.

2. OO ‑ EU Tax Exemption

This app simplifies the process of VAT ID verification for EU-based sellers. Designed for businesses of all sizes, it automates VAT-free transactions for EU customers while staying compliant with tax regulations.  

Top benefits:

• Automates EU VAT ID verification and tax exemption.
• One-click installation with multilingual support.
• Allows full customization of application styles and translations.

Limitations: While these apps excel in EU-wide VAT validation, they may not verify certain countries (e.g., Czech Republic VAT). Verify this capability before implementing.

Managing invoices for B2B

For B2B businesses, printing invoices is a crucial step. It goes hand in hand with apps for registering B2B buyers and is often essential for tax calculations. One app we've frequently recommended to our partners is Vify Order Printer PDF Invoice. It’s versatile, user-friendly, and delivers reliable results.

With this app, you can customize invoices to show or hide user information as needed. It’s particularly convenient for handling VAT, which is automatically included in invoices under the first-tier pricing plan.

Key advantages:

• Customizable templates: Tailor invoices to display or hide customer details as needed.
• Automated PDF delivery: Send invoices automatically for every order.
• Bulk actions: Download or print invoices in bulk or individually.
• Customer access: Let clients download their invoices via the customer portal.

This tool integrates seamlessly with VAT ID apps, ensuring the accurate display of customer VAT numbers on all invoices.

Key considerations for different business models

• For B2C Businesses: Leverage Shopify’s automatic tax calculation to simplify checkout for standard goods like clothing or food.
• For B2B Businesses: Prioritize VAT ID validation, tax exemption automation, and customizable invoicing to cater to corporate clients.
• Specialized Niches: Research product-specific tax requirements (e.g., supplements or medicines) and manually configure tax rates as needed.

Age verification

Since we’re discussing compliance, it’s important to address age verification for businesses selling age-restricted products such as alcohol. Laws vary: in Europe, the minimum age is 18, while in the U.S. it’s 21. To ensure compliance:

• Add an age verification step when a customer adds age-restricted products to their cart or before checkout.
• Age verification removes legal liability for underage purchases, making it a must-have for businesses in sensitive niches.

Recommended Apps for Age Verification

1. Age Verification by BlueCheck

Key features:

• Automatically verifies customer age using databases.
• Requests additional information like photo ID if no match is found.
• Can target specific products or regions for verification.

2. NA Age Verification

Key features:

• Adds an age verification screen when customers land on your site or before checkout.
• Flexible options, including popups, buttons, and date-of-birth fields.
• Customizable with disclaimers, Klaviyo integration, and developer API for advanced use cases.

These tools ensure age-sensitive products are sold only to customers who meet legal requirements, enhancing compliance and protecting your business.

Final Thoughts

Adjusting taxes in Shopify is a critical task for both compliance and customer satisfaction. By combining Shopify’s built-in features with powerful third-party apps, you can streamline tax management for B2C and B2B businesses alike. Whether automating VAT exemption, customizing invoices, or setting up age verification, the right tools and strategies ensure your store remains compliant while delivering a smooth shopping experience.