Introduction To Shopify Sales Tax
From $75 billion in 2004 to $787.9 billion in 2022, US e-commerce sales revenue has increased dramatically since Shopify's launch. The industry has grown roughly five times in the last ten years.
In its 16 years of existence, Shopify has created over $496 billion in sales, and it is predicted that by 2022, the platform will have generated half a trillion dollars in sales.
With this number in mind, you need to focus on the Shopify tax. This chapter will give you an overview of Shopify sales tax.
Today, sales tax must be a key issue for Shopify sellers, just as it is for eBay, Amazon, Walmart, Etsy, and any other seller. The main distinction for Shopify is that it is not a marketplace intermediary. It won't do it for you, unlike some of the other platforms.
Shopify Sales Tax In The US
Your first step should be to determine which states are relevant to you because each state has its own laws and regulations regarding sales tax levels and rates.
Figuring Out the Nexus States
"Physical nexus" is exchanged for "economic nexus" by online retailers. Nexus thresholds now consider the kinds of activities important to e-commerce.
List any states where you have the following to determine your nexus states:
- The clients (any at this stage, thresholds come next)
- storage facilities or inventory (including FBA if you use it for your Shopify orders)
- Employees
- Affiliates
- a physical company location or storefront (if applicable)
- Dropshipping associates
You're ready to check each state's thresholds after you have your list of states. If you do, you have nexus there and are required to collect and send the sales tax.
Good news! Some states don't apply sales tax to your customers, or if they do, it's little and restricted to certain areas. These states, which go by the initials N.O.M.A.D., include New Hampshire, Oregon, Montana, Alaska, and Delaware.
There is always a misconception that Shopify will collect the sales tax for you. Is it true? Let’s see.
Does Shopify collect sales tax for you?
You won't have your sales tax collected by Shopify. Because it is not a marketplace facilitator, it is not obligated to handle your sales tax collection and remittance.
Amazon, eBay, and Walmart are a few examples of marketplace facilitators. These websites facilitate the transactions between sellers and customers who compete for business using the same storefront.
These websites must now legally collect and remit sales tax on behalf of their sellers in some states, relieving individuals of that responsibility.
This resulted from the launch of Amazon's sizable own-brand product selection, which was being sold without paying sales tax, as well as efforts to improve sales tax collection enforcement. States can hold a few websites responsible much more easily than millions of sellers.
Sales tax is automatically added to any eligible shopping carts, collected by Amazon, and remitted for you if you are an Amazon seller in a state with marketplace facilitator rules. You never see that money, so you don't need to be concerned.
But Shopify is not a middleman in the market!
You have complete tax collection duty in addition to having complete control over your store and the additional freedoms that go along with it. This article will help you understand your obligations and how to fulfill them because Shopify is not compelled by law to assist you.
Every state in the US has its own Shopify tax rules and regulations. To have a clear view of the US Shopify sales tax, refer to the blog:
Shopify Sales Tax: The Ultimate Guide In 2022