Does Shopify Remit Sales Tax? Shopify Seller FAQs

Are you properly collecting and remitting sales tax in your Shopify store? Shopify has an estimated seller count above 4.4 million, making them one of the fastest growing platforms for eCommerce sellers.

Understanding the Shopify sales tax collection process can be overwhelming, especially as your eCommerce business expands into new territories. This makes it important to understand the basics of the collection process and when to reach out to an eCommerce CPA for help.

Take a look at the following FAQs that Shopify Sellers have surrounding sales tax. If you are still confused about the steps you need to take, reach out to one of our team members to set up a consultation.

How Does the Shopify Sales Tax Collection Process Work?

Shopify is not considered a marketplace facilitator, meaning they aren’t required to collect and remit sales tax on behalf of your Shopify store. This places the burden on you to understand which states you are required to collect and remit sales tax.

Keep in mind that you don’t technically own the sales tax you collect. Instead, you act as an intermediary between your customers and the state the tax is owed to. If you don’t properly collect sales tax from your customers, you will be required to pay the sales tax out-of-pocket with penalties and fees.

How Do I Setup and Collect Sales tax in Shopify?

Setting up sales tax in your Shopify store can be confusing. Here are some basics steps we suggest starting with:

1. Tell Shopify which states and goods to collect sales tax on
   1. Go to the home page, click “Settings”
   2. Click on “Taxes and Duties”
   3. Click on “United States”
   4. Click “Collect Sales Tax”
   5. Choose the states you want to collect sales tax
2. Set up your sales tax shipping options
   1. Go back to “Settings”
   2. Click on “Taxes and Duties”
   3. Click “Tax calculation”
   4. Click “Charge tax on shipping rates”
3. Tell Shopify which products to collect sales tax on
   1. Click “Products”
   2. Click “All Products”
   3. Select each product that sales tax should be charged
   4. After you edit each item, click “Charge tax on this variant”
4. Add physical warehouse locations
   1. Go to “Settings”
   2. Click “Locations”
   3. Add where products are shipped from. Sales tax rates can vary based on where the customer is receiving the product from.
5. Add tax-exempt customer information
   1. Go to “Customers”
   2. Click “Tax Settings”
   3. Check “Collect Tax”
   4. Click “Save”

What States Require Sales Tax Payments?

Each state has different laws surrounding the sales tax collection process. For example, some states don’t tax the purchase of clothing, while others do. The first step in collecting and remitting proper sales tax amounts is to know which states you are required to file in.

Most states have a nexus, which is a threshold that the sales must exceed before you are required to file sales tax. Every state has a different threshold. Generally, you will be required to file in the state in your business is located unless you live in Alaska, Montana, Delaware, New Hampshire, or Oregon. This applies even if you don’t have a physical office or warehouse location.

What States Do I Need to Register In?

ECommerce sellers are only permitted to collect sales tax in the states they have a registered sales tax permit. It is illegal to collect sales tax without authorization, so be sure you understand what states you are required to collect sales tax in before you register. As your business grows, you will need to register and collect sales tax in more states. If you expand operations through physical locations and have employees working in that state, you will need to register in that state.

Does Shopify Pay Sales Tax?

Shopify does not collect sales tax on your behalf. This means you are responsible for setting up the proper sales tax collection controls in your storefront.

Does Shopify Remit Sales Tax?

Shopify does not remit sales tax from customers. Although Shopify does facilitate the sales tax controls you set up, you are required to file and pay in the appropriate states.

Should I Charge Tax on Shopify?

You should charge sales tax on Shopify if you are required to. Since it is illegal to charge customers sales tax when there is no liability, you want to be sure you are only assessing tax on customers that are responsible for paying sales tax. For example, if your goods or services are exempt from sales tax in certain states, you should not collect any amounts on those goods.

When Do I Need a Shopify Accountant?

If you are confused about the setup, collection, or filing of sales tax, it’s time to reach out to a Shopify accountant. An eCommerce CPA can help you navigate your filing burden to ensure accuracy and timely remittances.