Sales tax in Shop

Starting on January 1, 2025, the Shop channel will automatically collect, remit, and file taxes for all orders shipping to or within the United States. The Shop channel collects taxes on orders in all states (plus the District of Columbia) that administer statewide sales tax, as well as Alaska local sales tax. Tax is reported under SC Commerce Services Inc. For more information on how these taxes are calculated, refer to the US taxes reference page.

Note

Orders placed using Shop Pay from online stores are excluded from these tax calculations. This only applies to orders placed on Shop app.

Product categories and tax rates

Regardless of your store’s tax settings, these calculations are made by the Shopify's sales tax product based on your product category designations. You aren’t charged for tax rate calculation on these orders.

Caution

To ensure proper tax calculations for your customers, it's important to keep product categories up to date. Tax calculations rely on your product categories to charge the appropriate tax rate.

If you don’t have a product category defined for a given product, then a product category is applied based on other product information, such as the product description. Tax overrides applied to products and tax exemptions applied to customers don’t apply to transactions in the Shop sales channel.

Payouts and transactions reporting

When you make a sale through the Shop sales channel in the United States, marketplace sales tax is deducted from your Shopify Payments payouts. Similarly, if a refund is made, then marketplace sales tax is transferred back to your Shopify Payments payouts. Payouts that are associated with these orders are marked as Marketplace sales tax in the Type column in your payout details. Transactions that are associated with these orders are marked as Filed in the Filed by channel column in the transaction view of your tax reports.

You might need to update your accounting flows to accommodate these payout activities. If you need assistance, then contact your accounting provider or enterprise resource planning (ERP) support team.

Refunds

Marketplace sales tax refunds can only be issued for specific items, not for general refunds. To receive a refund for marketplace sales tax on an item, it must specifically be refunded, either by refunding an entire order or refunding the item. If an item isn't identified as refunded, or the refund occurs outside of Shopify, then the marketplace sales tax can't be refunded.

Local and state reporting

You might still need to include these transactions in your reporting to your local or state authority. If you use Shopify Tax automated filing, then these transactions are included where required. Some states also include marketplace transactions within their nexus requirements. If you use Shopify Tax, then these transactions are included in the calculations for your tax liability insights where applicable. Consult a tax professional to verify the tax requirements for your business.

Tax collection certificates

Some states might ask for the Shop sales channel tax collection certificate during an audit. If you require a copy of this certificate, then contact Shopify Support. Shopify Support can provide you with the SC Commerce Services Inc. collection certificate for states where a certificate is required.