Tax services with Avalara AvaTax
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Using 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 tax jurisdictions, whereas Shopify's tax calculations are based on tax registrations or on location.
If your store is on Shopify Plus and you've previously activated Avalara AvaTax for your Shopify Plus plan, then you can charge taxes in your store using Avalara’s services instead of Shopify’s built-in tax engine. Avalara AvaTax also works on mobile devices.
You can use Avalara AvaTax to do the following:
- get accurate and up-to-date tax codes from more than 12,000 jurisdictions
- set tax rules to meet your business’s needs
- set tax rules per product
- create accurate reports of your business’s taxes
Bear in mind the following considerations when using Avalara Avatax:
- The service that is used to calculate your taxes might vary, depending on the channels that 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 refer to the order Timeline.
- The Avalara AvaTax app supports collecting VAT, but it doesn't support VAT exemptions. Avalara can't collect VAT IDs, which are required for exemption reporting and returns.
- If you issue a refund in Shopify without also selecting an item or restock quantity, then Avalara AvaTax doesn't create return documents.
- Partial refunds aren't reported in Avalara AvaTax. If you issue a partial refund, then reporting must be adjusted manually.
- Some third-party services report to Avalara, such as eBay, while others do not, such as Amazon or Facebook. Reporting from a third-party service might result in duplicate order information in Avalara AvaTax. If you have a service that reports orders to Avalara AvaTax, then you can change your settings to prevent Shopify from also reporting those orders. In your Shopify admin, go to Settings > Taxes and duties, open your Avalara AvaTax settings, and deselect Send documents to AvaTax.
- Avalara functions only in the Shopify checkout, and will not work with apps that replace the checkout. This includes Facebook and Instagram by Meta app.
- Orders made while your payment gateway is in test mode are calculated by Avalara AvaTax, but aren't committed to Avalara and don't appear there.
Migrating from Avatax
The Avatax app will be fully deprecated in the United States on May 1, 2025 and in all other regions on June 1, 2025. You can continue to use Avalara's tax services by migrating to Avalara Tax Compliance. This service requires you to sign an agreement with Avalara and pay them directly.
If you want to migrate to a Shopify tax service, then the following options are available:
Shopify will attempt to migrate the following settings from Avatax to Shopify's tax services at the time of migration:
- Product tax codes with a correlating product category in Shopify.
- Customer exemptions are set as Don't collect tax.
- Supported regions where you collect tax and correlating Tax IDs.
Shopify will not migrate the following settings from AvaTax to Shopify's tax services:
- Specific customer or company exemption types.
- Registrations for regions already set up in Shopify.
- End dates for registrations.
- Local nexus in the United States (except Alaska).
- Registrations for which a Manual Tax rate is set in Shopify.
- Sourcing rules, custom rules, and custom tax codes.
Settings that aren't automatically migrated must be manually configured within the Shopify admin. You can do this before or after the migration. Shopify Tax is available in the United States, the European Union, and the United Kingdom.
Refer to the AvaTax migration guide to prepare for the migration.