Collect accurate sales tax in the United States | Shopify Tax (2023)

Don’t sweat your sales tax

Take the stress out of sales tax in the United States with insights and collection built into your admin.

• Shopify merchants, on any plan, can use Shopify Tax to manage their US sales tax. The new features are currently being released to all Shopify stores that sell in the United States.

• Today, Shopify Tax is built exclusively to manage your US sales tax obligations. For more information on how to set up and collect tax outside of the United States, visit the Shopify Help Center.

• Shopify Tax is built right into your store’s admin, making it easy to get started collecting tax in the United States. We recommend 3 steps:

  • Register with the relevant state authority and turn on tax collection where you have nexus (typically you’ll be liable when you start making sales where you have a physical presence).
  • Categorize each of your products, so Shopify can appropriately apply any product-specific tax rates and you can be more confident that you’re collecting the right amount.
  • Check your sales tax insights as your sales grow to determine if you may be liable in any additional states. If you have a tax obligation, you can activate tax collection. It’s important to remember to register with the state before you start to collect tax.

  After taking these steps, you can relax knowing that Shopify has your back—even when rates change.

  Please note: When setting up tax collection with Shopify, it's your responsibility to consult with local tax authorities or a tax professional to verify that you’re collecting the correct tax rates from your customers and to ensure you file and remit your taxes correctly.

• You don’t need to do anything or make changes to access the benefits of Shopify Tax; your store will be automatically upgraded to the new service. It’s important that you review your product categorization in order to collect the most accurate tax rates at checkout.

  You should continue to monitor your sales tax insights to track where you have obligations and activate collection in applicable states. You’re still responsible for registering with the appropriate state agency and filing your taxes. Aside from that, Shopify Tax will handle all necessary updates and inform you of changes that impact your business.

• No, it is always your decision where and when to collect sales tax. Shopify will not start collecting tax on your behalf. Each state has its own rules for when you may need to collect tax and Shopify’s sales tax insights can assist you in determining where. It’s your decision when to enable taxes.

• Shopify has committed significant resources and finances towards two new features that provide increased sales tax accuracy for merchants. Once set, they work automatically so you can worry less about surprises at tax time.

  • Rooftop Precision: Today, your taxes are calculated at the city or zip code level which doesn’t account for all local taxes. This means that you may be under- or over-collecting. With Shopify Tax, collection is calculated with rooftop precision, giving you confidence that your customer’s specific tax rules are accounted for, no matter where in the US they live.
  • Product Categorization: Tax rates in each state depend on the type of product you sell. Shopify helps you properly apply the right tax rates to your products by recommending the right product category based on the product description you have entered. You have the ability to review and modify the category as needed, and Shopify will continue to make the necessary regulatory updates as the product tax rules change.

• A 2018 court ruling empowered states to collect taxes from out-of-state sellers. This introduced the concept of economic nexus. 11,000+ jurisdictions across 46 states introduced various rules and regulations to collect sales tax on thousands of products. These rules change on an unpredictable cadence (as often as every month!). Shopify Tax is designed to take the stress out of keeping up with these changes, and ensure your customers are paying the right amount. Maintaining this system is expensive, so Shopify charges a small fee in order to continue providing the most accurate tax calculations for our merchants.

• Shopify Tax is included in the cost of your Shopify plan for the remainder of 2022. And there will never be costs for the first $100,000 of US sales each calendar year.

  After $100,000 of US sales, a competitive fee of 0.35% (0.25% for Shopify Plus merchants) will be charged when an online order is made in a state where you have reached nexus and enabled tax collection.* To ensure that Shopify Tax is sustainable and affordable to merchants of all sizes, the fee is also capped at $0.99 per transaction and $5,000 per year. You won’t pay more than $0.99 cents on any given transaction or more than $5,000 in a calendar year, no matter how many sales your store makes.

  Here are some examples:

  • You’re a merchant who sells a $30 t-shirt in a state where you collect sales tax. You’ll be charged a transaction fee of $0.10. If you use Plus, you’ll be charged $0.08.
  • You’re a merchant who sells a $20,000 rug in a state where you collect sales tax. You’ll be charged a transaction fee of $0.99 because of the cap.

  
  

  Any fees for Shopify Tax will be reflected on your Shopify subscription invoice.

  *Fee is calculated based on the total transaction amount including taxes and shipping.

• No. $0.99 is the maximum a merchant will pay on any transaction. For Shopify Plus merchants, the transaction fee is 0.25% per order where sales tax is collected, up to a maximum of $0.99 per order. For all other merchants, the transaction fee is 0.35% per order where sales tax is collected, up to a maximum of $0.99 per order.

  Here are some examples:

  • You’re a merchant who sells a $30 t-shirt in a state where you collect sales tax. You’ll be charged a transaction fee of $0.10. If you use Shopify Plus, you’ll be charged $0.08.
  • You’re a merchant who sells a $20,000 rug in a state where you collect sales tax. You’ll be charged a transaction fee of $0.99 because of the cap.

• No. There is no charge for sales tax collection on POS.

• No. If you use Avalara or Drinks.com to calculate sales tax, you will not pay for Shopify Tax.

• Yes. You can continue to use third-party services for registrations and filing.

  Today, Shopify Tax provides you with sales tax insights, and accurate tax calculation and collection. In the future, we may expand our offering to provide other services like registrations and filing.

• Yes, you can choose to opt out of Shopify Tax if you feel it’s not the right solution for your business.

  Shopify Tax is a significant upgrade for most merchants, offering the highest level of compliance with a minimal amount of upkeep. The new Shopify Tax features provide improved accuracy and product-specific tax rates that are meticulously updated, giving merchants the confidence that they’re collecting the right rate at the right time. You can choose to continue using Shopify Tax with the fee structure outlined above, or opt out and revert to a Shopify legacy tax service. These services are free, but dependent on you keeping them up to date—or you risk exposing yourself to tax liability in US jurisdictions. Learn more about your options by visiting the Shopify Help Center or within the Taxes and duties section of your Shopify admin.

  When you use Shopify Tax, it’s up to your business to determine where and when you collect sales tax in the United States. Sales tax insights will notify you when you have reached nexus in a particular state, and each merchant must opt in to sales tax collection for states where they have an obligation. Unless you’ve activated sales tax collection in a state, Shopify Tax will not collect sales tax on your behalf.