Managing sales tax with Shopify Balance

To help save funds for tax obligations, you can allocate sales tax from your Shopify Payments payouts and Shop Pay Installments payouts using Balance.

Incompatibility considerations for managing sales tax with Shopify Balance

While setting aside sales tax in a dedicated Balance account is beneficial, it's important to be aware of the following limitations:

  • The amount of sales tax set aside might not include all the funds that you need for filing your taxes.
  • If a payout includes refunds or chargebacks, then the amount transferred from your payouts might not exactly match the sales tax collected from your sales.
  • Sales tax is only saved from Shopify Payments and Shop Pay Installments payouts. Payouts from other payment providers don't save sales tax to your dedicated Balance account.
  • Sales tax is only saved from your payouts while setting aside sales tax is turned on. Sales tax from previous payouts aren't included.
  • Sales tax isn't set aside from sales made through channels that already collect and remit sales tax on your behalf, such as Facebook and Instagram.

Allocate sales tax

After you turn on your sales tax account, sales tax is automatically transferred from your main Balance account to your sales tax account, starting with your next Shopify Payments payout or Shop Pay Installments payout. You can withdraw funds from your dedicated sales tax Balance account at any time.

While setting aside sales tax can help you during tax season, this feature doesn't automatically file taxes for you. When required, it's your responsibility to file your own taxes accordingly.

Steps:

  1. From your Shopify admin, go to Finances > Balance.
  2. Click Settings.
  3. Under Sales tax account, click Turn on.
  4. Choose an account option:
    • If you have multiple Balance accounts and want to save your sales tax funds to an existing account, then choose the account where your sales tax will be saved.
    • If you have only one Balance account, or want to create a new Balance account to save your sales tax, then follow the prompts to create a new account.
  5. Click Turn on.

Handling negative sales tax figures in payouts

If a payout includes a negative sales tax figure, then the sales tax amount is transferred back to your main Balance account from your sales tax account, unless your sales tax account doesn't have enough funds to cover the transfer. For example, refunding an order might cause a negative sales tax figure on a payout.

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