Sales tax for selling online in the U.S. with Shopify

Shopify offers a variety of options to help small e-commerce businesses comply with U.S. sales tax regulations when selling online in America. This article provides information on how to manage sales tax when using Shopify for e-commerce operations in the U.S. market.

Managing sales tax based on the Shopify plan

Depending on the Shopify plan used (Basic, Advanced, or Plus), sales tax management features may vary. The options include using Shopify's built-in tax functionality or integrating with an external sales tax management software like Avalara or Vertex. The complexity of your sales structure in the U.S. market—including the nature of the products sold online, the number of sales tax jurisdictions you operate in, and the need for a complete solution that also handles periodic tax filing—will influence your decision on which solution to choose.

Built-in sales tax features in Shopify

With its internal sales tax features, Shopify allows businesses to configure, manage, and collect sales tax in multiple states and even internationally.

Shopify Tax offers the highest level of sales tax management functionality with minimal effort for businesses selling to U.S. customers. Shopify provides two other tax compliance options, but Shopify Tax delivers the most automated and seamless experience among its internal tax management solutions. However, regardless of the level of automation, it is important to carefully review the taxability of products sold online state by state, product categories, etc., when setting up the tax management system.

Although Shopify Tax calculates sales tax on orders at checkout, it does not offer a tax filing feature. Therefore, businesses must decide how to handle periodic state-by-state sales tax returns.

Three key benefits of Shopify’s sales tax management tools

In summary, three advantages of using a sales tax management software for online selling with Shopify are:

• The ability to generate customized sales reports.
• The ability to connect to external systems for sales tax filing.
• The ability to override sales tax rates automatically set by the system.