When you have an online store, you need to think about sales tax. Do you need to collect it?
How do you collect it? What are the rules?
The answer to whether or not you need to collect sales tax on Shopify depends on a few factors. First, you need to determine if you have nexus in the state where your customer is located. Nexus is basically having a physical presence in a state, such as having a warehouse, office, or store in that state.
If you have nexus in a state, then you are required to collect and remit sales tax for all orders shipped to customers in that state, regardless of whether the order is placed online, over the phone, or in person.
If you do not have nexus in a state, then you are not required to collect sales tax for orders shipped to customers in that state.
PRO TIP: As of April 2020, Shopify is collecting sales tax on behalf of merchants in the following US states: Alabama, Arizona, Arkansas, California, Colorado, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island
The second factor to consider is whether or not the state in which your customer is located has a sales tax. Not all states have a sales tax, so this is something else you need to research.
If the state does have a sales tax, then you need to determine the rate. The rate can vary depending on the type of product being purchased and the location of the customer within the state.
Once you know these two things – whether or not you have nexus in the state and what the sales tax rate is – then you can make a decision about whether or not to collect sales tax on Shopify.
Do I Need to Collect Sales Tax on Shopify?
In short, unless you have nexus in a state, you do not need to collect sales tax for orders shipped to customers in that state.
Nexus
The first factor to consider is whether or not you have nexus in the state where your customer is located.
What is Nexus?
Nexus is basically having a physical presence in a state, such as having a warehouse, office, or store in that state.
Do I Have Nexus?
If you have nexus in a state, then you are required to collect and remit sales tax for all orders shipped to customers in that state, regardless of whether the order is placed online, over the phone, or in person.
If you do not have nexus in a state, then you are not required to collect sales tax for orders shipped to customers in that state.
(Note: even if you don’t have nexus but sell taxable items into a nexus state, your buyer may be obligated to self-remit use tax directly to their home state.).
Conclusion:
In short – unless you have nexus in a particular US State – you do not need to collect sales taxes from buyers in that State.
6 Related Question Answers Found
When you have a physical store, you have to charge sales tax on the products you sell. The same is true if you sell online through Shopify. You might have to charge sales tax on shipping and handling as well.
Yes, all Shopify merchants are required to remit taxes on their sales, regardless of whether they use Shopify Payments or not. There are a few things to keep in mind when it comes to collecting taxes on Shopify:
Shopify will automatically calculate and collect taxes for you if you’re using Shopify Payments, and will remit the taxes to the appropriate government agencies on your behalf. If you’re not using Shopify Payments, you’ll need to use a third-party tax solution to calculate and collect taxes, and then remit the taxes to the appropriate government agencies yourself.
The simple answer is yes, if you are selling products online through Shopify, you will need to charge tax on your transactions. This is because Shopify is an e-commerce platform and all online transactions are subject to tax. There are a few exceptions to this rule, but in general, if you are selling products online, you will need to charge tax.
As an online business owner, you are responsible for making sure that the right amount of tax is being collected from your customers and remitted to the government. This can be a bit of a daunting task, especially if you are just starting out. Do you need to charge tax on Shopify?
As a Shopify merchant, you’re responsible for paying any taxes that apply to the sale of your products, including sales tax, value-added tax (VAT), and goods and services tax (GST). When you set up your Shopify account, you’re asked to enter your business address. Shopify uses this information to determine whether or not you need to charge sales tax on your orders.
As an online business owner, it’s important to know whether or not you need to collect taxes on your Shopify store. Depending on your business location and the products you sell, you may be required to collect taxes from your customers. In the United States, for example, businesses are required to collect sales tax in states where they have a physical presence, such as a brick-and-mortar store or warehouse.
