Shopify Starts Taxing Return Shipping Fees on October 23. What to Check Before Then

If you charge customers for return shipping, Shopify will start calculating tax on that fee for US returns beginning October 23, 2026. Most merchants on Shopify Tax will not need to do anything, but anyone with a manual workaround needs to look at it this week.

What is actually changing

Until now, return shipping fees on US returns could show up with $0 tax. From October 23, Shopify calculates applicable tax on those fees the same way it treats other shipping charges, based on your existing shipping tax settings.

If you have set shipping as untaxed in a state, return shipping fees in that state stay untaxed. The update applies to orders shipped to US addresses. Restocking fees, handling fees, international returns, and returns with no return shipping charge are outside the change.

Who needs to act

If you use Shopify Tax or Tax Platform, Shopify calculates the tax, shows an estimate when you create a return, and records the final amount when you process it. The amounts flow into your tax reports automatically.

The risk sits with merchants who built their own process. That includes a spreadsheet adjustment, an accounting rule, or an app that adds tax to return fees. After October 23 those methods can double count tax.

A five-point check before October 23

1. List every place a return fee is created. Native returns, a returns app, a support macro, and manual refunds in admin can all add a fee.
2. Find any manual tax step. Ask your bookkeeper whether return fee tax is added by hand or by a rule in your accounting tool.
3. Check your shipping tax settings by state. The new behavior follows them, so a setting you forgot about will now matter on returns too.
4. Separate fee types in your reporting. Return shipping fees are taxed in this update. Restocking and handling fees are not. If they sit in one line item, your reports will be muddy.
5. Run one test return after the date. Confirm the estimate at creation matches the recorded amount, and that your books show one tax entry, not two.

What this means for your return fee strategy

A taxed fee is a slightly more expensive fee for the customer. If you charge $7.95 for a return label, the customer may now see a few cents more in some states. That is small, but it lands at the moment a shopper is deciding whether to keep the item or ask for a refund.

It is a good prompt to revisit how you set fees at all. Flat fees are simple, but they punish low-value orders. Fee structures tied to order value, item category, or resolution type recover cost where it actually occurs. Merchants who control their own fee logic can adjust when tax rules shift, instead of waiting on a vendor.

Keep-the-item and store credit outcomes help here too. If a return would cost more to process than the item is worth, no label means no return shipping fee and no tax question at all.

A note on timing

October 23 lands just before peak. Return volume in January will be the first real test of your setup, so use the next three weeks to settle the fee structure, clean up the reporting, and document the change for whoever closes your books.

Want return fees you control, discounted labels, and no monthly software fee? See how ShipAid Returns & Exchanges lets you set fees and resolution types yourself.