Tax services with Avalara AvaTax

Avalara AvaTax is sales tax software that automates tax calculations and the tax filing process. Avalara provides real-time tax rates from more than 12,000 taxing jurisdictions (whereas Shopify's taxes are based on zip codes).

If your store is on Shopify Plus and you have an Avalara AvaTax account, then you can activate Avalara AvaTax for your plan. After it's been activated, you can use Avalara in your Shopify admin to charge taxes in your store using Avalara’s services instead of Shopify’s built-in tax engine. Avalara AvaTax also works for Shopify POS on Android and iOS devices.

You can use Avalara AvaTax to:

  • get accurate and up-to-date tax codes from more than 12,000 jurisdictions
  • fine-tune a set of tax rules to meet your business’s needs
  • create accurate reports of your business’s taxes

If Avalara isn't currently part of your plan and you'd like to add it, then contact Shopify Plus Support.

Tax calculations

The service that is used to calculate your taxes can vary, depending on the channels you use for sales and your setup with third-party services. To determine which service was used to calculate the taxes on a specific order, open the order from the Orders page in your Shopify admin, and then in the Paid section, locate the Tax line.

  • If the tax on the order was calculated by a third-party service, such as Facebook or Avalara, then a tooltip (ⓘ) is displayed next to Tax. Hover over the tooltip to verify which service calculated the tax.
  • If the tax on the order was calculated by Shopify, or if no tax is charged, then no tooltip appears.

Limitations and known issues

  • The Avalara AvaTax app supports VAT but not VAT exemptions. You can use Avalara to calculate VAT, but Avalara can't collect VAT IDs, which are required for exemption reporting and returns.
  • If you refund a dollar amount for an order without also selecting an item or restock quantity, then the refunded tax amount won't be applied to a specific item, and a return document won't be created in Avatax Console.
  • You need to set up your Shopify Tax settings, even when you use Avalara AvaTax. If Avalara is temporarily unavailable, then your Shopify tax rates are used to calculate the taxes for your orders.
  • Some third-party services can report to Avalara, resulting in duplicate order information. If you have a service that reports orders to Avalara, then you can change your settings to prevent Shopify from also reporting those orders. In your Shopify admin, go to Settings > Taxes, open your Avalara settings, and uncheck Send documents to AvaTax.
  • Orders made while Shopify Payments is in test mode are calculated by Avalara, but aren't committed to Avalara and don't appear there.

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