Refund Product Tax for Returns: Give Customers Back the Tax They Paid, Item by Item

Overview

Customers returning a product expect to get back what they paid, and that includes the tax on that product. The Refund product tax feature lets you refund the tax tied to each returned item, review it before approval, and adjust it when needed.
This article covers how the feature works, how to turn it on, what customers see, how to approve requests, and how tax-inclusive prices are calculated. At the end, it also explains the updated Refund solution display for exchange requests.

Availability

Refund product tax is available on the Pro, Ultimate, and Plan for Support plans. It is not available on the Free and Free Extra plans.

What the feature covers

Refund product tax applies to the tax attached to each returned product in the original order.

• Included: product-level taxes, such as VAT applied to a specific line item.
• Not included: shipping tax, import duties, and any tax calculated on the whole order rather than on a single product.
• Products with no tax: if a product had no tax in the original order, no tax is refunded for it.

Step 1: Turn on Refund product tax

The feature is off until you enable it in your Return rule.

1. Go to Rules → Return Rule.
2. Turn on Refund product tax.

Once it’s enabled, tax refunds appear in the return flow for both customers and merchants.

Step 2: What customers see on the portal

Before submitting a return request, customers see an Estimated refund tax on the summary screen. It appears below the total return value and is added to the net refund amount.

Please note that this figure is an estimate, not a guarantee of the final refund. The final amount depends on:

• the products and quantities you actually receive,
• any fees or deductions, such as restocking fees,
• the refund method, and
• your confirmation when you approve the request.

After you approve the request, the return detail page on the portal shows the approved tax amount.

Step 3: Review and confirm tax on the Approve page

When you open a return request to approve it, the refund tax appears under each item, so you can check it product by product. The tax names follow the original order, for example VAT. The Summary panel adds up all item taxes as Refund product tax and includes them in the Expected refund.

In this example, three items are returned:

Editing the refund tax

You can change the refund tax before approving. Click the Refund tax value under an item, enter the new amount in the tax field (for example, VAT), and click Save.
[IMAGE 2: “Refund tax for this product” popup with the VAT field. Crop to the popup only.]

Refund tax and tax-inclusive prices

How the tax is calculated depends on whether the product price includes tax.
Price excludes tax. The approved refund tax is added to the product price.

Refund = 500 + 125 = 625
Price includes tax. The system removes the original tax from the price, then adds the approved refund tax.

You edit the refund tax to 125
Refund = 500 − 100 + 125 = 525
This way, the original tax is never counted twice.

Refund tax in automatic approvals

The Auto approve automation has its own option for refunding tax. It is off by default.

• Option off: requests are auto-approved with a refund tax of 0, even if the portal showed an estimated amount to the customer.
• Option on: product tax is refunded automatically when the request is approved.

If you want tax refunded without manual review, turn this option on in your auto approve rule. Otherwise, customers may see an estimate on the portal that is not included in the automatic refund.

Updated Refund solution display for exchange requests

We’ve also improved how Refund solution appears for exchange requests, so you can see at a glance who owes what. It depends on the price difference between the returned and exchange items:

When you owe the customer money, the Refund solution section on the Approve page asks you to Choose Refund Method before you can approve.

Quick recap

• Refund product tax refunds the tax tied to each returned product, and is available on Pro, Ultimate, and Plan for Support.
• Turn it on in Rules → Return Rule.
• Customers see an estimate on the portal, but the final amount is confirmed when you approve.
• You can review and edit the tax for each item on the Approve page.
• For tax-inclusive prices, the original tax is removed and the approved refund tax is added.
• Auto approve refunds tax only if you enable that option.

Updated on: 14/10/2026