Basic Tax

Note

This guide is for merchants who use Basic Tax calculations to sell in the United States. If you use Shopify Tax, then refer to Shopify Tax. If you use Manual Tax, then refer to Manual Tax.

It's your responsibility to consult with local tax authorities or a tax professional to verify that you charge your customers the correct tax rates, and to ensure that you file and remit your taxes correctly.

To make sure that you're charging the correct amount of tax, configure your tax settings on the Taxes and duties page in your Shopify admin.

Limitations of Basic Tax

The following features are not available in Basic Tax:

• Automatic rate calculations using product categories
• Automatic recommendations for product category
• Rooftop accuracy
• Support for state fees
• Tax holidays
• Tax liability insights
• Advanced reports
• Collecting tax in states with no state sales tax

If you require any of these features, then review the table of tax services to determine which tax service is best for your needs.

Before setting up Basic Tax

If you're new to Shopify, then you need to determine whether you should charge sales tax before you start selling. You might need to register with multiple tax agencies. After that, you can set up your taxes in Shopify to help ensure that you charge the correct rates wherever you sell in the United States.

Before you add tax registrations in your admin at Settings > Taxes and duties, review the following considerations:

• You need to determine whether you should charge sales tax. If you're not sure, then consult with a US state tax authorities or a tax professional. For a summary of state tax rules, refer to the US taxes reference.
• If you need to charge sales tax in one or more US jurisdictions, then you need to contact each of the relevant agencies and register with them. The process varies depending on where your business is based and where you sell, and on the individual government requirements. For links to various US tax agencies, refer to the state tax reference.
• To ensure that your tax rates are correct, create a location for your business if your inventory is fulfilled from a location that's different from the address you have set in your Shopify admin at Settings > Store details. If the address that you set in the Address section in your Shopify admin at Settings > Store details is different from the address that you set as a location, then the location address is used to determine nexus, which is a physical or economic connection to a state. The Store details address isn't used if you have created a location.

Set up Basic Tax

After you register with the tax agencies and have your sales tax ID, you can set up your taxes.

Steps:

1. In your Shopify admin, go to Settings > Taxes and duties.
2. In the Manage sales tax collection section, click United States.
3. In the Regions you're collecting in section, click Collect sales tax.
4. Select a state or region in which you're registered.
5. In Sales tax ID, enter your sales tax ID. If you have applied for a sales tax ID, but you don't have one yet, then leave this field blank. You can update it when you receive your sales tax ID.
6. Optional: If your business is located in a state where tax laws regarding shipping vary, then you can choose whether you want to charge tax on shipping.
   1. Click Advanced options.
   2. Under Shipping tax, choose whether you want to apply shipping tax.
7. Click Collect sales tax.
8. Optional: Add more regions and account numbers by clicking Collect sales tax.

Some states have laws that affect whether shipping is taxable. If you're registered to charge tax in California, Colorado, Florida, Illinois, Louisiana, Maine, or Maryland, then you can choose whether to charge taxes on shipping.

If you're not sure whether you should charge taxes on shipping, then leave this option on the default setting and check with US state tax authorities or a local tax professional.

Next steps

You can create tax overrides for products where the default tax rates don't apply, or shipping rates for specific states.