Shopify does not remit or file taxes for merchants

Shopify does not remit or file taxes for merchants. Merchants are responsible for reporting their earnings and filing them with the federal government themselves, but Shopify does not handle any of that paperwork on your behalf.

Nexus

Nexus is just a fancy term that refers to your responsibility to pay taxes based on your sales. There are two types:

  • Physical nexus - businesses selling products from a physical location

  • Economic nexus - online sales (eCommerce)

For most Shopify merchants, the economic nexus is what you need to be aware of (except if you also sell from a physical location).

There are certain thresholds that you need to meet before your store becomes eligible to collect sales tax from customers. These thresholds can vary from state to state.

Check out this state-by-state guide to economic Nexus laws by Avalara (a tax compliance software company)

Registration for collecting sales taxes as a Shopify Merchant

When you met the threshold for eligibility in collecting (remitting) sales taxes from customers for a specific state, the next step is to register for a sales tax permit with the state revenue agency.

For this step, we recommend using a sales tax registration service or a company that specializes in filing sales tax permits for Shopify merchants.

You will need to give the state revenue agency your business name and address as well as an email address where they can send communications regarding your registration. You may also need to register with additional states as soon as you meet the respective thresholds for the economic nexus.

Once you have registered, the revenue agency will generally send a sales tax permit or registration number to your business email address within 30 days of receiving payment from you. You can then begin collecting and remitting sales taxes on orders shipped to customers in that state.

Shopify Sales Tax Setup

  1. Click on "Settings" on the lower-left menu of your Shopify admin.

  2. Select "Taxes". From here, you can click on "Manage" and fill in the published tax rates for the state that you store operates in (obtained during registration).

  3. That's it — taxes are now set for your Shopify store and you'll start collecting taxes for qualified transactions.

Remitting Sales Taxes

Everything goes straight into your bank account following a sale. It will be your responsibility to keep track and set aside your taxes since they're not part of your revenue.

As for remitting your sales taxes, you have three options:

  • DIY (not recommended especially if you're dealing with several states).

  • Use a third-party app like TaxJar which will file your taxes for you (for a monthly fee).

  • Use a sales tax filing service.

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