They help identify businesses for VAT-related tax treatment.
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VAT numbers are used to identify businesses that are registered for Value Added Tax (VAT) with a tax authority.
They are commonly used to:
Verify that a business is VAT-registered
Apply the correct VAT treatment on sales and purchases
Issue compliant VAT invoices
Support cross-border business transactions, especially within the European Union
Report VAT to tax authorities
Claim VAT deductions or refunds where allowed
In Shopify, merchants can store VAT numbers (tax IDs) for their business and, in some cases, validate customer VAT numbers to help apply the correct VAT rules for eligible B2B transactions.