Tax Exempt Manager: This is what's new in our Shopify app for VAT exemption for B2B customers

In your own store, you are always faced with tax challenges - especially when it comes to foreign trade and VAT.

So that you can focus on more important areas of your e-commerce business again in the future, our developer team created an app for Shopify stores some time ago, which has recently been further developed and supplemented with some functions: Our Tax Exempt Manager.

In this post, we'll show you how your international B2B customers can use TEM to get the correct VAT rates per country and exact net prices displayed in the checkout.

Value added tax in international e-commerce

Both domestic sales and sales to countries outside the EU are clearly regulated:

• If you sell products in Germany, you will be charged VAT (exception: small business regulation).

• However, when selling to countries outside the EU, you do not have to show VAT.

However, things get a bit more complicated when selling from one EU country to another: here, different rules apply to VAT for different customer segments and products. The main difference is between B2B and B2C sales:

• Business-to-Customer: If you sell to private customers (B2C) in another EU country, you have to pay VAT. In this case, the German VAT rate applies in part and that of the country in which your customer is located in part.

• Business-to-Business: In B2B business within and outside the EU, cross-border deliveries to businesses are tax-free in the country of origin, while the buyer must pay VAT in the country of destination. For sales outside the EU, there is an obligation to prove that the goods were exported to a country outside the EU.

Shopify merchant challenges related to VAT

These different regulations cause worry lines on the foreheads of Shopify merchants from time to time. This is because the store system has two special features if you also want to offer your products outside of Germany and sell them to business customers at the net price.

We now know: when selling to customers inside and outside the EU, the basic rule is that you do not have to charge these customers VAT and therefore do not have to pay VAT to the tax office. However, if you have created all prices including VAT as a total price in your store, you may wonder why, for example, the price at the checkout for US customers has not changed despite the elimination of VAT. Because in this case, Shopify only shows the tax portion as 0% or 0€ and does not deduct the VAT from the cart value.

Of course, this 0% or 0€ is not wrong per se, however, your customer still has to pay the full offer price here, even if you could actually offer them a net price. This is theoretically very easy to implement, but you have to convert all prices in your store (i.e. product prices and shipping) into net prices. The theme of your store must then be adjusted so that the total price is displayed again. The background: if you sell to the end consumer, you must always display the final price, i.e. including VAT. To do this, whenever the price is displayed in the theme, the net price must be converted to the gross price.

If you only sell products in your store that are subject to the full VAT rate (19% in Germany), simply multiply the net price by 1.19. If, in addition, you also sell products with a reduced VAT rate (7% in Germany), things get a bit more complicated. In this case, you will need to multiply by 1.19 or 1.07 depending on the product. Once the prices are all converted to net, you need to proceed as follows: Under Settings → Taxes there is a checkbox All taxes are included in my prices. Now that you have created a product with net price, you need to uncheck this box.

At the checkout, these changes now mean that for sales to international B2B customers, not only is the VAT shown as 0%, but the stored net price is actually applied. In this constellation, Shopify adds the VAT to the net price according to the tax settings under Settings → Taxes and also the 0€ if the corresponding customer has a tax rate of 0%. This way, customers outside the EU can then buy from you at the "real" net price.

Attention: if you change your Shopify store to net and the prices in your theme to gross, there is a small side effect. Depending on the arrangement of the products in the shopping cart, there may be rounding differences.

How can the Tax Exempt Manager solve these problems?

You see: Manually setting VAT rates for every order from abroad is very time-consuming and should be avoided if possible. So that you don't have to manually adjust each invoice for your B2B customers and check each VAT number individually, the Latori team has developed an app: The Tax Exempt Manager.

With Latori's TEM, you can sell internationally in a legally compliant manner with the applicable tax regulations, allowing you to easily and reliably complete B2B sales without VAT. To enable you to do this, the Latori Apps team has developed an algorithm for the TEM. This automatically records and checks the VAT ID of your B2B customer against the official EU database VIES.

If the VAT ID provided is correct, the amount in the checkout is automatically corrected and your customer can shop without VAT. For this, buyers do not even need to create an account. In addition, the TEM allows your customers to see prices excluding taxes.

The advantages of the Tax Exempt Manager at a glance

For Shopify merchants, using Tax Exempt Manager brings numerous benefits:

• Time saving: Thanks to the TEM, on the one hand, you no longer have to manually adjust your invoices. On the other hand, you will be spared having to pay back tax to foreign traders who are liable for VAT.

  Increase in sales: Due to the VAT exemption within and outside the EU, your sales will increase.

  Customer satisfaction: Since your business customers can benefit from the VAT exemption quickly and easily, you increase customer satisfaction and customer loyalty.

  Usability: The TEM is easy to install and works with both gross and net prices.

  Clarity: Thanks to a list with all the orders created after a positive VAT ID check, you can easily keep track of everything.

Tax Exempt Manager 2: What's new?

This year we have further developed and optimized our Tax Exempt Manager for you. We are happy to show you what our Shopify app has in store for you. In addition to all the features and benefits from the previous two chapters, more have been added to TEM:

Tax Exempt Manager: Cost, Download & Integration of the Shopify App

You can easily download Tax Exempt Manager from Latori in the Shopify app store. You have the option to try the app for free for 14 days. After that, it costs $9.99 per month.

Installing and using the app is quite simple. You just need to insert the sales tax ID text box and we will provide you with code and instructions for it. Also, TEM promises a seamless workflow through direct access in the Shopify admin area.

Conclusion

We summarize: With our Tax Exemption Manager, you can get a handle on the VAT clutter in your Shopify store. The app not only allows you to show your B2B customers from abroad the exact net prices. It is also safe from counterfeiting, as it only works with confirmed VAT IDs. Installation is also quick and straightforward, and if you want to change any text or the style, you can easily do so by tampering with the code yourself. So what are you waiting for? Save time and increase both sales and customer satisfaction by using Latori's TEM.

 To the Tax Exempt Manager