How to set up Shopify to support tariff calculation
1. Shopify tax engine functionality and limitations
When duties are enabled in Shopify, whether using the classic markets scheme or the new markets scheme, there are several important considerations:
- Shopify modifies the tax engine when duty calculation is activated.Enabling duties affects the collection of VAT and sales taxes in all For example, if you collect EU VAT under the IOSS scheme and activate duties for the US market, you must also enable duties for the EU market. Otherwise, EU VAT collection will stop.
- Overrides are ignored when duties are enabled.This means that reduced VAT rates or exemptions, such as for books or food products sold in the EU, will no longer apply.
The following examples of duty settings illustrate these issues in practice.
Example: Duties enabled but configured only for the US market:
Collection of taxes is enabled in the UK and EU:
Collection of sales tax is disabled in the USA:
If the EU taxation screen view is opened, Shopify displays a mistake:
In this configuration the store will not collect or display VAT for the EU sales.
To alleviate this situation duties should be enabled for the EU market:
Once enabled, the tax view changes, and the error message disappears:
And the taxation becomes enabled in the checkout for all EU countries.
If you compare the checkout view to the one shown further up you can see that “Duties” line is added, but since it is an IOSS order duties are 0. Orders over 150 EUR will be calculated as DDP with duties:
2. New tariff system and inventory
Not all products in the new tariff system will be subject to additional tariffs. Certain product categories will remain tariff free even after 29 August 2025, when the de minimis threshold for low value consignments is removed.
For example, books that originate in the UK or EU will continue to be sold without new tariffs. However, books printed in China will face a 7.5 percent duty.
As explained in the previous newsletter, it is essential to ensure that the correct US HS codes and the country of origin are entered for each item in your store at product level.
3. Practical application of the “duties enabled” environment
When deciding how to configure your store, you should always relate the setup to your business model. The examples provided here do not cover every possible scenario or workaround. Instead, they demonstrate a few methods that can be adapted to fit your specific business needs.
Examples of configurations
Example 1: Clothing store
The US market is prioritised, and duties are enabled for US sales. For the EU market, two approaches are possible:
• Use a courier DDP service for orders over 150 EUR (IOSS remains valid for orders under this threshold).
• Alternatively, disable EU taxation and duties in Shopify and apply a price markup to cover VAT.
Important: Without a DDP contract, parcels are shipped DDU. In this case the consumer will be charged twice, once at checkout (for IOSS VAT) and again on delivery (for duties and taxes).
Example 2: Book store
A UK-based store sells mainly books printed in the UK, which are not subject to additional US duties. Duties are not enabled in Shopify. Instead, correct HS codes and country of origin are entered when shipping. EU sales continue to benefit from reduced VAT rates.
For merchandise sold to the US, catalogue prices are increased to cover potential duties.
Important: If no DDP contract is in place, parcels to the US are shipped DDU. Consumers may be charged both the IOSS VAT at checkout and duties on delivery.
Example 3: Clothing store with fulfilment from China
Most sales are under IOSS, and there is no possibility to use a DDP service from China. The US market is therefore not prioritised, and duties are not enabled in Shopify.
Instead, US catalogue prices are marked up to account for duties, while EU IOSS and VAT collection remain unchanged.
Important: These shipments are DDU by default. Consumers will pay IOSS VAT at checkout and may also be charged again for duties and taxes on delivery.
These examples show how much the choice of configuration depends on the business model and logistics arrangements. Always confirm the final checkout view after changes.
Merchants can attempt their own configurations, but support is available from EAS if needed.
EAS is happy to provide the full US store configuration in close collaboration with Merchants as paid separate service.