As a merchant, you might need to charge taxes on your sales, and then report and remit those taxes to your government. Although tax laws and regulations are complex and can change often, you can set up Shopify to automatically handle most common sales tax calculations. You can also set up tax overrides to address unique tax laws and situations.
Shopify uses many default sales tax rates, which are updated regularly. If you use the default rates, then confirm that they are current and correct for your particular circumstances. You can override them whenever necessary.
Shopify doesn’t file or remit your sales taxes for you. Depending on where you live, you’ll need to register your business with your local or federal tax authority and deal with it directly. However, the calculations and reports that Shopify provides should help make things easier when it’s time to file and remit your taxes.
You should always check with a local tax authority or a tax accountant to make sure that you charge your customers the correct sales tax rates, and to make sure you file and remit the taxes correctly.
General process to set up taxes
You don't need to follow a formal list of steps to set up your taxes, but you can use this process as a guide:
If you're running an online store, then set up the countries you will be shipping to. You do this step first because the default tax rates are based on your shipping zones.
If you're using the Shopify POS app to sell in person, then set up the tax rates based on your retail store locations. You do this step so that the default POS tax rates are based on the geographic location in which your in-person sales take place.
Set up the tax rates in the countries and regions to which you will be selling and shipping your products:
- If you're in the United States, choose automatic tax settings or manually specify the rates for state, county, and municipal taxes, including shipping taxes.
- If you're not in the United States, use the default values or specify the rates for countries and their regions. You also specify whether you will charge taxes on shipping.
If you sell digital products, then set up the taxes that apply to these items.
Override tax rates or exempt products from taxes where necessary. Any overrides that you set apply to online sales and to Shopify POS sales.
As you set up taxes, you can access and review your settings on the Taxes page in your Shopify admin:
If you want a summary of the sales taxes that were applied to your sales, the Taxes finance report is a good place to start.
For many businesses, the report that can help you most with your sales tax reporting is the Sales finance report. You can export this report as a CSV file that includes the order amounts, taxes, and the POS, billing, and shipping locations. To make the most of this report, make sure you choose the correct time period (such as the calendar year), and select Full report when you export it. This report helps you get the information that you or your accountant needs to work on your sales tax returns.
If your store is on Shopify Plus, then you can use Avalara AvaTax to handle more complex tax situations.
Click any of these links to learn more:
- US taxes
- Non-US taxes
- Shopify POS taxes
- Digital product taxes
- Tax overrides and exemptions
- GST in India