Shopify does not collect or remit sales tax on your behalf by default
Shopify is a platform that hosts your store and processes payments. It does not automatically collect sales tax from your customers or send that money to state tax authorities. You are responsible for understanding which sales are taxable in your state, setting up tax collection in your Shopify settings, and remitting what you collect to the right agencies on the right schedule.
Shopify provides tools to calculate and collect tax at checkout if you configure them. But the legal obligation to collect, track, and remit sales tax belongs to you as the business owner. If you do not set up tax collection in Shopify and do not collect tax from customers, you still owe the tax to your state — you just have to pay it out of your own pocket instead of from customer payments.
Key Takeaways
- Shopify will calculate and collect sales tax at checkout only if you turn on tax settings in your store admin and configure rates for your state.
- You must remit collected taxes to your state tax authority yourself — Shopify does not send the money on your behalf.
- Tax rules vary by state, and some states tax digital goods or services while others do not, so you need to know your state's rules before you configure Shopify.
- If you sell across multiple states, you may owe sales tax in states where you have "nexus" — a legal connection that can include having customers there, depending on your state's rules.
- Shopify provides a tax settings page where you can enter rates, but you are responsible for keeping those rates current and accurate.
How to turn on sales tax collection in Shopify
Log into your Shopify admin and go to Settings, then Taxes and Duties. You will see options to enable sales tax collection by state. For each state where you need to collect tax, you enter the tax rate and choose whether Shopify should calculate tax based on the customer's shipping address, billing address, or your store location.
Once you turn on tax collection for a state, Shopify will add the calculated tax to the customer's checkout total. The tax amount appears as a line item in the order. Shopify does not separate this money from your regular sales revenue — it all goes into your Shopify Payments account or your chosen payment processor. You then have to manually track how much tax you collected and send it to your state.
If you use a third-party payment processor instead of Shopify Payments, the tax collection settings still work the same way. The tax is calculated and shown to the customer, but the money flows through your payment processor, not through Shopify.
What Shopify does not do with collected taxes
Shopify does not hold collected taxes in a separate account. It does not file tax returns on your behalf. It does not remit taxes to state authorities. It does not track how much tax you collected across all your orders — you have to pull that data yourself from your Shopify reports or export your order data to a spreadsheet.
Some larger e-commerce platforms offer tax remittance services where they collect the tax and send it directly to states for you. Shopify does not offer this. You are responsible for the entire remittance process, including knowing when your state requires you to file and pay.
Sales tax rates and when to update them
Sales tax rates change. States raise rates, counties add local taxes, and special districts impose their own rates. If you have entered a tax rate in Shopify and that rate changes, you have to go back into your tax settings and update it manually. Shopify does not automatically update rates when states change them.
Before you enter a rate into Shopify, check your state tax authority's website to confirm the current rate. Many states have a sales tax lookup tool where you can search by zip code to find the combined state and local rate. Once you enter a rate, set a reminder to check for changes at least once a year, or whenever your state announces a rate change.
Multi-state sales and nexus
If you sell to customers in multiple states, you may owe sales tax in states where you do not live. Whether you have to collect tax in another state depends on whether you have nexus there — a legal connection to that state. Nexus rules vary by state and can include having a physical location, employees, inventory, or in some states, simply having customers there.
As of 2024, most states follow economic nexus rules, meaning you owe sales tax in a state if your sales there exceed a threshold set by that state. Common thresholds are $100,000 or $500,000 in annual sales, but the exact number varies. If you cross that threshold, you have to start collecting tax in that state, even if you have no physical presence there.
Shopify's tax settings allow you to add rates for multiple states. But you have to know which states you have nexus in. If you are unsure, check each state's tax authority website or consult a tax professional, because owing tax in a state you did not know about can result in penalties.
Tracking and reporting what you collected
To know how much tax you collected, you need to run a report from your Shopify admin. Go to Analytics, then Reports, and look for sales reports that break down tax by order. You can also export your order data as a CSV file and use a spreadsheet to sum tax by state.
Keep this data organized by state and by month or quarter, depending on your state's filing schedule. Most states require you to file a sales tax return and remit collected taxes monthly, quarterly, or annually. Your state tax authority will tell you the schedule when you register for a sales tax permit.
If you have not registered for a sales tax permit in your state, that is usually your first step. You register with your state tax authority (often called the Department of Revenue or Department of Taxation), receive a permit number, and then receive instructions on when and how to file returns and send payments.
What happens if you do not collect tax
If you do not turn on tax collection in Shopify and do not collect tax from customers, you still owe the tax to your state. The state will expect you to remit it from your business income. If you do not pay, the state can assess penalties and interest, and in some cases pursue collection action against your business.
If you collected tax but did not remit it, the consequences are more serious. States treat uncollected and unremitted sales tax as a debt owed by the business, and some states hold business owners personally liable. This is one reason it is important to set up tax collection correctly from the start and to remit on time.
Frequently Asked Questions
Does Shopify automatically send my sales tax to the state?
No. Shopify calculates and collects tax if you configure it, but you must remit the money to your state tax authority yourself. Shopify does not file returns or send payments on your behalf.
What if I sell digital products or services instead of physical goods?
Tax rules for digital goods and services vary by state. Some states tax them, others do not. Check your state tax authority's website to see whether your products are taxable. If they are, you configure tax collection in Shopify the same way as for physical goods.
Can I use Shopify's tax settings if I sell in multiple states?
Yes. Shopify allows you to add tax rates for multiple states. But you are responsible for knowing which states you have nexus in and for keeping rates current. Shopify does not determine nexus for you.
How often do I need to remit sales tax?
The filing schedule depends on your state and your sales volume. Most states require monthly, quarterly, or annual filing. Your state tax authority will specify the schedule when you register for a sales tax permit. Check your state's website or contact the tax authority directly.
What if I made a mistake on my tax rate in Shopify?
If you entered an incorrect rate and collected the wrong amount of tax, contact your state tax authority to report the error. You may owe the difference, or you may be able to adjust it on your next return. Do not ignore the error — states can assess penalties for underreporting.