---
title: "Tax-exempt customers on Shopify: customer settings, checkout, POS and draft orders"
description: "Make a customer tax-exempt on Shopify, why exempt buyers still get charged tax, and how exemptions work at checkout, in POS, on draft orders and for B2B."
url: "https://www.quotway.com/blog/shopify-tax-exempt-customers"
type: "blog post"
category: "Shopify how-to"
published: "2026-10-23"
verified: "2026-10-23"
audience: "Shopify merchants selling to tax-exempt customers - resellers, non-profits, exempt businesses"
scope: "Customer tax settings and the exemption list, online checkout, Shopify POS, draft orders, B2B company locations, tax services, tax-included pricing, duties, and exemption certificates"
locale: "en"
source: "QuotWay - B2B Quote & Negotiation App for Shopify"
---

# Tax-exempt customers on Shopify: customer settings, checkout, POS and draft orders

To make a customer tax-exempt on Shopify, open the customer in your admin, choose **Manage tax settings**, and pick *Don't collect tax* - or *Collect tax unless exemptions apply* and select the specific exemption. Shopify then leaves tax off that customer's orders, in your online store and in Shopify POS. Three things decide whether it actually works: the order has to belong to that customer, your tax service has to support customer exemptions, and the exemption doesn't remove tax that is already inside a tax-included price.

This guide covers the customer record, checkout, POS and draft orders, what an exemption doesn't do, and where B2B company locations differ. Everything about Shopify below was checked against Shopify's own pages on 23 October 2026; sources are at the end. It explains the settings, not who qualifies - eligibility is a question for your accountant or tax authority.

## Where Shopify keeps a tax exemption
Shopify stores exemptions in two places:

| | Customer | Company location (B2B) |
| --- | --- | --- |
| **Used for** | Orders from an individual customer | Orders placed for a B2B company location |
| **Settings** | *Collect tax*, *Don't collect tax*, or *Collect tax unless exemptions apply* | The same choices, plus a tax ID or VAT number on the location |
| **Where** | Customers → the customer → **Manage tax settings** | Customers → Companies → the company → the location → tax settings |

If a customer has both, the company location's exemptions win: in the data Shopify passes to tax apps, "the company location tax exemptions take precedence". [B2B tax exemption on Shopify](/blog/shopify-b2b-tax-exemption) covers the company-location side in depth; the rest of this page is about the customer record.

## Set a customer as tax-exempt
1. **Open the customer.** In your Shopify admin, go to Customers and open the customer.
2. **Open the tax settings.** In the Customer section, click the menu icon, then Manage tax settings.
3. **Choose the tax setting.** Under Tax setting, choose Don't collect tax for a full exemption, or Collect tax unless exemptions apply and pick the exemptions under Select exemptions.
4. **Add a VAT number if the customer has one.** Shopify validates it automatically.
5. **Save.** Click Save, then test with one real order placed as that customer.

*Don't collect tax* removes all tax from that customer's orders. *Collect tax unless exemptions apply* is narrower: tax is collected except where a selected exemption covers the order.

## Which exemptions you can choose
The specific exemptions come from a fixed list Shopify maintains. It includes:

- **Canada:** status card, diplomat, reseller, fishery, production and machinery, contractor, subcontractor, Ontario purchase and farmer - each only in the provinces it applies to, and only "for those provinces where you are registered for taxes".
- **United States:** a reseller exemption for each state.
- **Australia:** reseller.
- **EU and UK:** the reverse charge.

There is no free-text exemption. If a customer's exemption isn't on the list, *Don't collect tax* is the setting that removes tax - and it removes all of it.

## Online checkout
The exemption lives on the customer record, so the order has to be that customer's order. Shopify's help pages don't spell out how a guest checkout is matched to a customer, so don't rely on matching: ask exempt customers to sign in to their account before they pay, or create the order for them as a [draft order](#draft-orders).

Then test it once. Place a real order as the exempt customer - signed in, with a product you sell and an address you ship to - and confirm the tax line reads zero. If tax still appears, check the [limits below](#limits) before anything else.

## Shopify POS
Exemptions you set up are applied when you sell in Shopify POS: add the customer to the cart and tax comes off. Shopify notes a display difference on its Canadian exemptions page - on Android the subtotal updates as soon as you select the tax-exempt customer, on iOS it stays the same until you tap **Charge**.

For a one-off sale without a customer record, you can turn tax off in the cart itself: tap **Taxes** in the cart to deactivate tax rates for the whole order, or tap an item to deactivate them for that item. Stores in the EU "might not be able to turn tax rates off on Shopify POS", so that they stay fiscalization compliant.

## Draft orders and quotes
A draft order has its own **Charge taxes** switch (in the Payment section, under **Estimated tax**). But once a customer is on the draft, Shopify uses the customer's tax setting instead - so for an exempt customer, add the customer and the exemption follows.

That makes a draft order the reliable route for a negotiated sale to an exempt buyer: you build the order for the customer, send the invoice, and the buyer pays at a checkout that is already theirs. Set the exemption before you create the draft; Shopify calculates tax when the draft is built and again at checkout. If the tax on the final order surprises you, [why the tax on a quote doesn't match the order](/blog/quote-tax-doesnt-match-order) traces each input Shopify reads.

## B2B company locations
On a store using Shopify B2B, tax exemption for a business buyer belongs on the **company location**, not on each contact: the location holds its own tax settings and tax ID or VAT number, and a B2B order uses them. Two differences from the customer record matter:

- **Reverse charge at checkout.** Shopify's VAT number validation at checkout, which can apply the EU/UK reverse charge automatically, "isn't currently available for B2B-specific checkouts". For a B2B buyer, set the exemption on the location yourself.
- **Precedence.** Shopify's documentation for tax apps says that when a buyer has both, the company location's exemptions take precedence over the contact's own customer exemptions.

[B2B tax exemption on Shopify](/blog/shopify-b2b-tax-exemption) walks through the location settings, the reverse charge and what Shopify doesn't store.

## What an exemption doesn't do
- **It needs a tax service that supports it.** Customer exemptions work with Shopify Tax and with Basic Tax where Shopify offers it; they are not supported with Manual Tax.
- **It doesn't lower tax-included prices.** "If you set a customer to be tax exempt, but you use tax-included pricing, then the customer is still charged the full listed product price." On a tax-included store, price exempt buyers explicitly - with a draft order at an agreed price, for example.
- **It doesn't cover duties.** "Customer tax exemptions (both individual customer and company/B2B level) aren't applied to duties and import taxes." Exemptions apply to domestic orders, and to international orders where you don't use Shopify's duties and import taxes feature.
- **It doesn't verify anything.** "It's not possible to verify exemptions from the Shopify admin." Shopify records the setting you choose; it doesn't check the buyer's status.
- **It beats your overrides.** "Customer tax exemptions always take precedence over tax overrides" - a product override won't put tax back on an exempt customer's order.

## Certificates and records are yours to keep
Shopify's guidance is that an eligible customer "will have a certificate or other form of documentation proving their status", and that you can ask for a copy. Shopify doesn't store or validate those certificates. Keep them where your accountant expects them - a shared folder for a handful of accounts, or a dedicated exemption-certificate app as the list grows - and note when each one expires. A [wholesale account application](/blog/wholesale-account-application-shopify) is a natural place to collect the certificate before the first order.

## Where QuotWay fits
QuotWay doesn't decide or store tax exemptions; Shopify does. When a quote converts, QuotWay creates a Shopify draft order that carries the buyer's exemption the way Shopify expects it: a quote linked to a Shopify customer becomes a draft order for that customer, so the customer's own tax setting applies, and a company-aware quote carries the company location with its exemption. The convert screen shows Shopify's calculated tax before the draft order is created - see [converting a quote to a draft order](/docs/converting-to-orders/convert-a-quote-to-a-draft-order).

Conversion is described on [convert quotes to orders](/features/convert-to-orders). Company-aware quoting needs the Enterprise plan and a Shopify store with B2B; plans are on the [pricing page](/pricing).

## FAQ

### How do I make a customer tax-exempt on Shopify?

Open the customer in your admin, click the menu icon in the Customer section, choose **Manage tax settings**, and set **Tax setting** to *Don't collect tax* - or to *Collect tax unless exemptions apply* with the specific exemptions selected. Save, then test with one real order placed as that customer.

### Why is my tax-exempt customer still being charged tax?

Check four things: the order belongs to that customer (signed in, or a draft order with the customer on it); your tax service supports customer exemptions (Manual Tax doesn't); your prices aren't tax-included (an exempt customer still pays the full listed price); and the charge isn't duties and import taxes, which exemptions don't cover.

### Can I make an order tax-exempt in Shopify POS?

Yes. Add a tax-exempt customer to the cart and their exemption applies, or tap **Taxes** in the cart to deactivate tax rates for that order. Stores in the EU might not be able to turn tax rates off in POS, for fiscalization compliance.

### Does Shopify store resale or exemption certificates?

No. Shopify records the customer's tax setting but doesn't store or verify certificates - "it's not possible to verify exemptions from the Shopify admin". Collect and keep the documentation yourself or with a certificate-management app.

### Can I create a tax-exempt draft order?

Yes. Turn off **Charge taxes** under Estimated tax on the draft, or add a tax-exempt customer - once a customer is on the draft, Shopify uses the customer's tax setting instead of the draft's switch.

### Where do B2B tax exemptions go?

On the company location. It has its own tax settings and tax ID or VAT number, and Shopify's documentation for tax apps says its exemptions take precedence over the contact's own customer exemptions. See [B2B tax exemption on Shopify](/blog/shopify-b2b-tax-exemption).

## Sources

Shopify pages, read on 23 October 2026:

- [Managing customers](https://help.shopify.com/en/manual/customers/manage-customers) - Manage tax settings, the three tax settings, VAT number validation
- [Canada tax exemptions](https://help.shopify.com/en/manual/taxes/canada/canada-tax-exemptions) - the exemption list, POS behaviour, documentation, no verification in the admin
- [Choose a tax service](https://help.shopify.com/en/manual/taxes/shopify-tax/choose-tax-service) - customer exemptions by tax service
- [Tax overrides and exemptions](https://help.shopify.com/en/manual/taxes/tax-overrides) - exemptions take precedence over overrides
- [Include or exclude taxes from prices](https://help.shopify.com/en/manual/taxes/include-exclude-taxes) - exempt customers on tax-included pricing
- [Duties and import taxes considerations](https://help.shopify.com/en/manual/international/duties-and-import-taxes/considerations) - exemptions don't apply to duties
- [Adjust tax rates in the POS cart](https://help.shopify.com/en/manual/sell-in-person/transactions/cart/adjust-tax-rates) - cart and item tax toggles, EU fiscalization
- [Creating draft orders](https://help.shopify.com/en/manual/fulfillment/managing-orders/create-orders/create-draft) - the Charge taxes switch
- [VAT validation in checkout](https://help.shopify.com/en/manual/taxes/shopify-tax/vat-validate) - not available for B2B-specific checkouts
- [DraftOrderInput](https://shopify.dev/docs/api/admin-graphql/2026-10/input-objects/DraftOrderInput) and [Tax exemptions for tax apps](https://shopify.dev/docs/apps/build/tax/tax-exemptions) - the customer's setting on drafts, exemption codes, company-location precedence

QuotWay behaviour is described from its public documentation and the app's source, read on 23 October 2026.