When we talk about an online store, it's very common to focus all the attention on the products: their price, discounts, stock levels, and taxes. However, there's another equally important aspect that is often left until the last minute: shipping costs. To make matters worse, many store owners forget that shipping charges are also subject to taxes. And that can become an expensive mistake. Shipping costs are not just an additional charge; they also have applicable tax rates, affect the final order total, and impact how invoices are issued.
Shipping costs are also taxable
The first key point is simple: shipping costs are part of the transaction and are therefore subject to taxation as well. They should not be treated as an unrelated extra charge or as an isolated figure. To make things even more complex, the tax treatment may depend on both the shipping carrier and your own business operations. Not all online stores handle shipping charges in the same way or operate with the same cost structure. Some businesses pass the full cost on to the customer, others subsidize part of it, while some apply different rules based on destination, weight, volume, or cart value. All of these factors influence how shipping should be configured and taxed within WooCommerce.
In practice, WooCommerce must be configured so that shipping costs are properly integrated into the store’s tax logic. This helps prevent discrepancies between what the customer sees, what is actually charged, and what is ultimately reflected on the invoice.
Where shipping taxes are configured in WooCommerce
In WooCommerce, the foundation of tax configuration is found under Settings > Tax. This is where you define, among other things, how taxes are applied and displayed for both products and shipping costs.
You should review:
- Whether catalog prices are entered inclusive or exclusive of tax..
- How prices are displayed throughout the store, as well as in the cart and checkout.
It is especially important to pay attention when entering shipping method prices, whether you are using WooCommerce’s built-in shipping options or configuring rates through plugins such as Super Shipping for WooCommerce. Your shipping setup must be aligned with your overall tax strategy. For example, simply setting a shipping cost of “$5” is not enough. You need to be absolutely clear about whether that $5 already includes VAT or whether the applicable tax will be added afterward.
In addition, Super Shipping for WooCommerce provides the option to display shipping prices either inclusive or exclusive of tax. It can even inherit the tax display settings configured in WooCommerce itself. While this may sound complicated at first, the logic is actually quite straightforward. As explained in the plugin documentation, the “Apply taxes?” This field allows you to specify whether or not you want to apply taxes to the calculated shipping rates. When applied, the entered prices will be displayed with taxes included or excluded, depending on what has been set in the Tax tab of the WooCommerce settings (this behavior can be disabled via the checkbox that appears when selecting “Yes”). Therefore, if you’ve chosen to apply taxes to shipping costs and, at the same time, have disabled the “prices entered with tax” feature, the appropriate tax will always be added to the shipping prices you enter.
Should shipping costs be displayed including or excluding VAT?
Both approaches are perfectly valid. What we do recommend, however, is avoiding a mix of different criteria throughout your store. We are not here to tell you how to run your online business—the strategy is entirely up to you—but it is important to understand how customers may perceive the information they see during the purchasing process. If you display shipping costs including tax, customers see a more direct and final price from the outset. This often creates a smoother shopping experience because there are fewer surprises when they reach checkout. On the other hand, displaying shipping costs excluding tax provides greater detail and technical transparency throughout the purchasing process. However, if your settings are not configured correctly, taxes may not appear until the customer reaches the cart or checkout page, potentially resulting in an unexpected increase in the final amount and a less satisfactory user experience. Whichever approach you choose, the key is consistency. Customers should clearly understand the cost of shipping and how taxes are being applied, without encountering unexpected changes as they move through the checkout process.
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