Shopify Sales Tax Requirements
If you are selling physical goods, you will likely need a sales tax permit to collect and remit sales tax to state and local tax authorities. To obtain a permit, apply with your state. Shopify automatically calculates sales tax. You still need to file and remit sales tax monthly using an app like TaxJar.
Setting Up Sales Tax on Shopify
Shopify automatically collects sales tax. To turn it on, go to Settings > Taxes. Their Tax Manual guides you through setup. You can also set up overrides. If you use Shopify Payments, it calculates and collects tax automatically. If not, set it up manually. Their support helps with questions.
Sales Tax Considerations for Shopify Sellers
Vendors must collect sales tax if they have nexus where the item is sent. Sole proprietors can run Shopify shops freely. Sales tax involves your and customers’ locations and products sold. Know physical nexus rules. Registering for a tax ID gives you legal rights to collect taxes and ensures compliance. Consider when and why to register.
Sales Tax: You need to collect sales tax based on your physical location and economic nexus. You can set up charging sales tax by a physical store location in the Shopify backend. TaxJar is a third-party app that can help you keep track of how many transactions you’ve had in a state and file taxes automatically.
Income Tax: You need to pay taxes on any income you’ve received from your business. Your business entity structure determines how the taxes are structured. You can deduct expenses from your business account, such as the cost of goods, shipping, and marketing costs.
Setting Up Taxes on Shopify
If you determine that you need to charge tax on your products, then register with your region’s tax authority. Set up the regions in which you’re registered. After you’ve registered with tax authorities and have your tax number, you can set up your taxes.
Tax Setup Process in Shopify
To start setting up sales tax on Shopify, go to your store’s settings and navigate to the taxes and duties section. Here, you will find a list of available countries or regions. Enter the locations where you want Shopify to collect sales tax on your behalf.