Shopify Sales Tax

Some online platforms used for selling products are considered Marketplace Facilitators. This means that the platform is responsible for collecting and remitting sales tax. This removes the responsibility to collect and remit sales tax as a seller on those platforms. Shopify is not considered a Marketplace Facilitator, so the sellers on this platform are responsible for collecting and remitting sales tax.  

Shopify does not file or remit sales taxes for you. The platform does not handle tax collection or the tax settings for sellers. Before enabling tax collection for your online store, it is important to evaluate where you have sales tax nexus and whether your products are taxable in those jurisdictions.

Steps to Collecting Sales Tax on Shopify

1. Complete a thorough sales tax nexus review for both physical nexus and economic nexus.
2. Register necessary sales tax account.
3. Obtain sales tax certificates.
4. Enable sales tax collection on all required platforms for the registered jurisdictions.
5. File sales tax returns and maintain sales tax account.

Follow the links for more detailed information:

1. If you are running an online store, then set up the countries you will be shipping to.
2. If you are using Shopify POS to sell in person, then set up the tax rates based on your retail locations. The default POS tax rates are based on the geographic location in which you’re in-person sales take place.
3. Set up the tax rates in the countries and regions to which you will be selling and shipping your products:
   1. If you are in the United States, Canada, the European Union, the United Kingdom, Norway, Switzerland, Australia, or New Zealand, which use registration-based taxes, then enter your tax registrations to collect tax.
   2. If you are in a region that uses location-based taxes, then use the default values or specify the rates for countries and their regions. In addition, specify whether you will charge taxes on shipping.
4. If you sell digital products, then set up the taxes that apply to these items.
5. Override tax rates or exempt products from taxes where necessary. Any overrides that you set apply to online sales and to Shopify POS sales.
6. Optional: Include taxes in all your product prices. When this option is enabled, no additional charge for taxes is added to a customer’s checkout. Instead, a calculation is done to determine what percentage of a product’s price is tax.

As you set up taxes, you can access and review your settings on the Taxes and duties page in your Shopify admin.

Nexus determination is one of the most complex and worrisome aspects of running an e-commerce site. You must determine how much to charge in taxes for each customer’s jurisdiction, and you must collect and pay these taxes on time. The fact that Shopify sales tax software determines your business’s economic nexus for you and collects the appropriate amount of sales tax on your behalf is a great benefit of using this platform.  

However, while you are legally required to collect and pay taxes on sales in other states, it is illegal to collect these taxes without first completing a sales tax registration in that state. Our sales tax firm can register your company for you in each state in which you do business.  

Shopify’s sales tax collecting, and reporting rules can differ from those of other platforms such as Etsy — do not take chances. Rely on our sales tax firm to ensure you are in compliance with tax laws with regard to your sales on Shopify.