Registration-based taxes in the US

Note

This guide is for merchants who sell in the United States. 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 you file and remit your taxes correctly.

If you're already using Shopify to sell in the United States, then you can update your US sales tax settings to reflect your tax registrations. This change doesn't affect how sales tax is charged on your store.

When you update your tax settings, you're asked to provide a tax registration number. After it's been added, Shopify automatically sets the tax rates that apply in the areas you've registered for. If you aren’t registered to collect sales tax in any states listed in your tax settings, then you can remove them.

Shopify Support can help you update your tax settings in your Shopify admin, but can't provide legal tax advice. If you need help changing your tax settings, then contact Shopify Support. If you need help understanding your tax obligations, then contact US state tax authorities or a tax professional.

Do I need to register to charge taxes?

It depends. In general, you're obligated to collect tax in any US state where you both have economic nexus and sell taxable goods or services.

For more information, refer to US taxes reference. If you're unsure whether you need to register for a tax account, then reach out to US state tax authorities or a local tax professional.

What's a sales tax ID? Do I need one?

A sales tax ID is a number provided to you by your state tax authority after you register with them to collect taxes. This number is issued by states to allow you to charge taxes there.

You need a sales tax ID number only if you determine that you need to charge taxes in a particular state.

How do I know if I need to register?

Typically, you need to register if you have economic nexus in a state. What constitutes nexus in each state can differ. Some states require you to register and collect taxes only if your business is physically located within that state, while others might require you to register based on distribution centers or advertising within those states.

If you have any significant presence in a state, then you should contact its tax authority to confirm whether you need to register to collect taxes. For more details, see US taxes reference.

I need to register. What do I do?

If you need to register to charge state taxes, then you can do so on that state's website.

After you complete your registration, add your sales tax ID number on the Taxes and duties page.

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 are registered.
5. In Sales tax ID, enter your sales tax ID. If you have applied for a sales tax ID but don't yet have one, 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.

You can delete or change your registrations or account numbers with the ... button next to the state name and account number in the Regions you're collecting in section.

Will I be able to override tax settings?

Yes. For more information about how US tax overrides are affected when you update, refer to Override taxes.

Where can I go for more help?

Shopify Support can help you with how to change your settings, but can't advise you about whether you should change your settings. If you need help determining whether you should register with tax agencies and charge taxes to your customers, then your best resource is a local expert, such as an accountant or financial advisor. You can also reach out to individual tax agencies directly.

What do I need to know about Brexit?

If you sell to customers in the UK, then the best way to get information about how Brexit affects your business is by contacting a local tax professional. As a starting point, the following are some of the new laws that apply to merchants who sell to customers in the UK:

• You might need a UK EORI number.
• The UK VAT laws that came into force on January 1, 2021 result in new VAT requirements for sales equal to or less than 135 GBP.
  • If the sale of goods is equal to or less than 135 GBP, then you must register for VAT in the UK. In this case, VAT is collected at the point of sale and remitted by the merchant. If you use registration-based taxes and have a UK VAT registration, then VAT will be applied to your sales to customers in the UK.
  • If the sale of goods is over 135 GBP, then you might not be required to collect VAT at the point of sale. In this case, VAT and duties are remitted by the importer. If you use registration-based taxes and have a UK VAT registration, then VAT will not be applied to your sales to customers in the UK. If you choose to, you can charge your customer for VAT and duties at the time of sale, and then provide these funds to the shipper or importer using a shipping label. Alternatively, you can send the orders without charging VAT and duties, and your customer will pay extra funds at the time of delivery. Learn more about handling VAT and duties.

Learn more about the implications of Brexit for your business.

What do I need to know about selling in the EU?

Note

Tax laws for selling to EU member countries changed on July 1, 2021.

When merchants outside the EU ship orders to customers in EU member countries, then the following import and duty rules apply:

• For orders that are equal to or less than 150 EUR, VAT is applied.
• For orders that are greater than 150 EUR, import VAT and duties are applied.

If you don't charge VAT and duties during the checkout process, then your customer pays them to the shipping carrier upon delivery.

If you want to collect VAT at checkout, then you need to register for a VAT number. To help you manage the complexity of registering for a VAT number, reporting your sales, and remitting VAT, the EU has introduced the Import One-Stop Shop scheme (IOSS). If you're not sure whether you should apply to the IOSS, then contact a local tax professional.

After you receive your IOSS number, you need to add it to your tax registration in your Shopify admin. Before you add your IOSS number to your tax registration, make sure that you've set up a shipping profile for the European Union.

Steps:

1. From the Shopify admin, go to Settings > Taxes and duties.
2. In the Tax regions section, beside European Union, click Manage.
3. In the Shipping to the EU section, next to VAT on sales to the EU, click Collect VAT.
4. From Registration country, select the country where you registered for IOSS.
5. In IOSS VAT number, type your IOSS number.
6. Click Collect VAT.

I've updated my tax settings. Why am I getting different tax amounts?

In some orders, you might notice a small variance in your total tax amounts after you've updated your tax settings. This variance is due to tax amounts being rounded at the line-item level, rather than at the invoice level. You can learn more about rounding calculations in Setting up US taxes.