Shopify sales tax is a confusing issue for several online retailers. This guide is for you to make complex subjects super easy. Here’s everything you need to know about Shopify sales tax.
What is Shopify Sales Tax?
Shopify sales tax is nothing but a small percentage of the money that is paid to the legislating bodies for the specific goods sale. Regulations and tax laws are changed often. You could set up Shopify automatically for handling widespread tax calculations.
Be aware that Shopify never remits or files any sales tax for you. You should register the business with the federal or local tax authority for handling the sales tax. The reports & calculations that Shopify offers can make things better while paying & filing taxes. You don’t own the taxes which you collected. Shopify sales tax is usually received from the sellers, and shoppers, and passed to the state.
The best thing about selling online is that you don’t sell in our state locally. You don’t need to pay the sales tax over sales other than in your home state. Mainly small businesses, that have one location can collect Shopify sales tax within the state of home.
Different types of Tax added to the sale on Shopify
Before starting with Shopify sale tax let’s know the tax types for buying goods & services. These consumption taxes are based over the country. Being a business owner, you can reach unique needs. Here are the common tax types which you should know about Shopify.
- Value-added tax is known as VAT. This type of tax is charged at every production stage in the consumption tax. Here the service or goods type could be changed at many stages.
- Sales tax type is the one-time tax charged for a purchase. This tax type charges money, and it moves to the seller and then the government.
- GST ( goods and services tax) is a needed tax to be charged while the supply chain. Unlike VAT, GST isn’t based on extra value. GST is charged for certain businesses’ manufacturing processes.
A Shopify plus agency can help businesses with every one of sales taxes that keeps the business growing with utmost power.
Guide to set up taxes for your Shopify store
Here’s how to set up the store for the Shopify sales tax:
1. Select the store address
You should add the store address to Shopify and apply remote and local sales taxes correctly. Go to Shopify admin > Settings > General then enter the store address.
2. Develop shipping zones
Now select regions to which you like to ship. Visit Shopify admin > Settings > Shipping. Below shipping, zones choose to add a shipping zone. Enter your name and regions that your like in the zone.
4. Set up tax rates automatically for the economic nexus
Shopify is not fully optimized to calculate tax rates automatically. Add the physical presence of the States ZIP code and add a tax override for the reasonable products. If the destination-rate tax rate is applied, including the physical presence of the ZIP code only for that state. No need to include an override.
4. Set tax rates automatically for the physical nexus
Set Shopify to calculate tax rates automatically for the shipping zones in the physical nexus. Visit Settings > Taxes then finish the following sections.
If the presence in states has various rules over shipping rate taxation, set a manual override. Select country to enable automatic tax calculation. Add states where you had physical stores with zip codes.
5. Set tax exemptions
If you like to calculate the sales tax manually or like to include an override, then set a tax exemption. Create a product collection of the related items by choosing, then Products, and Collections then Create Collection. Now visit the setting to set tax exemption. Choose Taxes, then Country, and click Tax overrides. Then select location or collection from the menu and add related rates and location.
Best practices to set up Shopify sales tax
After setting the taxes and a filling & reporting system here are a few practices to look after and follow.
- Include the store’s physical location although you are selling online. Shopify takes this info that supports origin and destination-basis tax calculations.
- Known what firm you should fill the taxes. Ask the government after you had the tax permit. Forms varied depending on whether you are a corporation, sole proprietor, or a partnership.
- Add sales tax as another line while checkout so people know about it.
- Set up the tax overrides for collecting upon taxable items.
- A robust software can scale the business easily. Even a Shopify agency can build a powerful valuation and built-in tax tracking feature. That provides real-time reporting via tax rates so you can easily collect ‘value-added tax’ through consumers.
Shopify lets several merchants scale businesses by enabling them to reach several people online. Need help with Shopify, then hire a Shopify agency. These Shopify experts can easily streamline the Shopify sales tax process and manage the full financial situation of your business. Hope this guide helped you. Have any doubts, drop them in the comment box below.