The Complete Sales Tax Guide for Shopify Sellers

Shopify is an e-commerce platform that makes it easier for individuals and businesses to create and manage their own online stores. It offers a range of services, including website creation, payment processing, inventory management, and customer engagement tools, all of which cater to both online and in-person sales channels. As of 2025, Shopify powers approximately 5.54 million active online stores worldwide, accounting for about 29% of all e-tailers. 

Selling online through Shopify gives entrepreneurs a way to grow their business without worrying about renting a storefront. But with this convenience comes the responsibility of dealing with sales tax. The platform doesn’t automatically handle your sales tax obligations: you’re responsible for setting up tax rates, collecting the correct amount from your customers, and filing returns on time. If you’re a Shopify seller, this guide outlines what you need to know to stay compliant.

What Is Sales Tax? An Overview

Sales tax is a government-imposed fee collected from consumers at the point of sale for certain goods and services. In the U.S., sales tax is administered at the state and local levels, which means there isn’t one national sales tax rate. Each state sets its own rules about who must collect tax, what items are taxable, and how much tax to charge.

For Shopify sellers, this means your sales tax obligations depend on your business activities. If you have a physical presence or meet certain sales thresholds in a state, you might be required to collect sales tax there. This is known as having a sales tax nexus.

What Is Nexus and How Do You Know If You Have It?

Sales tax nexus is a legal term for having a connection to a state that requires you to collect and remit sales tax. There are two different types of nexus: physical and economic. The differences between the two can be found in the table below. 

	Physical Nexus	Economic Nexus
Definition	A physical presence in a state that requires you to collect and remit sales tax.	A sales or transaction threshold in a state that triggers a sales tax obligation, even without a physical presence.
Examples for Shopify Sellers	Having an office, warehouse, or employees in a state (e.g., a fulfillment center in Texas).  Attending a trade show in California for more than 15 days (per CA CDTFA rules).	Exceeding $100,000 in sales or 200 transactions in Florida in a year (per Florida DOR, 2025).  Making $500,000 in sales in California (per CDTFA, 2025).
Impact on Tax Collection	You must collect sales tax in states where you have a physical presence, regardless of sales volume.	You must collect sales tax in states where you exceed economic thresholds, even if you have no physical presence.
How Shopify Sellers Track It	Monitor physical activities (e.g., where inventory is stored, like Amazon FBA centers). Shopify’s dashboard can track sales by location to identify potential physical nexus.	Use Shopify sales reports to track revenue and transactions by state (e.g., $120,000 in Florida sales triggers nexus). Apps like Avalara can automate threshold tracking.
Filing Requirements	Register for a sales tax permit in the state (e.g., $63 for Colorado, per prior Shopify guide), collect tax at checkout, and file returns (monthly, quarterly, or annually).	Same as physical nexus: register, collect, and file. Economic nexus often resets annually, so monitor sales yearly (e.g., California’s $500,000 threshold resets January 1).
Challenges for Shopify Sellers	Managing nexus from temporary activities (e.g., pop-up shops) or third-party warehouses can be tricky. Shopify doesn’t automatically flag a physical nexus.	Tracking sales across 50+ states is complex. Shopify sellers often need automation (e.g., TaxJar) to monitor thresholds and avoid missing new obligations.

Each state sets its own nexus thresholds, so you’ll need to monitor your sales in each location where your customers live. Fortunately, Shopify’s reports and third-party sales tax software can help you track these numbers, so you’ll find it easier to stay on top of your obligations.

Economic Nexus Thresholds by State

While each state is different, many of them follow a similar model for setting economic nexus. You can find the thresholds for every state in the US below:

State	Sales Threshold	Transaction Threshold
Alabama	$250,000	None
Alaska	No sales tax	N/A
Arizona	$100,000	None
Arkansas	$100,000	200
California	$500,000	None
Colorado	$100,000	None
Connecticut	$100,000	200
Delaware	No sales tax	N/A
Florida	$100,000	None
Georgia	$100,000	200
Hawaii	$100,000	200
Idaho	$100,000	None
Illinois	$100,000	200
Indiana	$100,000	None
Iowa	$100,000	None
Kansas	$100,000	None
Kentucky	$100,000	200
Louisiana	$100,000	None
Maine	$100,000	None
Maryland	$100,000	200
Massachusetts	$100,000	None
Michigan	$100,000	200
Minnesota	$100,000	200
Mississippi	$250,000	None
Missouri	$100,000	None
Montana	No sales tax	N/A
Nebraska	$100,000	200
Nevada	$100,000	200
New Hampshire	No sales tax	N/A
New Jersey	$100,000	200
New Mexico	$100,000	None
New York	$500,000	100
North Carolina	$100,000	None
North Dakota	$100,000	None
Ohio	$100,000	200
Oklahoma	$100,000	None
Oregon	No sales tax	N/A
Pennsylvania	$100,000	None
Rhode Island	$100,000	200
South Carolina	$100,000	None
South Dakota	$100,000	None
Tennessee	$100,000	None
Texas	$500,000	None
Utah	$100,000	200
Vermont	$100,000	200
Virginia	$100,000	200
Washington	$100,000	None
West Virginia	$100,000	200
Wisconsin	$100,000	None
Wyoming	$100,000	None

These thresholds apply to remote sellers without physical locations. Keep in mind, however, that they reset annually, with the schedule usually based on the calendar year. If your sales are near these limits, it’s time to consider registration.

How to Set Up Sales Tax Collection in Shopify

Shopify allows you to set up your tax settings based on the regions where you have nexus. You can enable automatic tax calculations based on state and local rates. Start by listing the states where you’re registered for sales tax. Then Shopify will apply the correct tax rate to customer orders in those states.

To set this up, log in to your Shopify admin, go to Settings > Taxes and Duties, and click on each region where you’re required to collect tax. You’ll need your sales tax permit or registration number for each state. Once your tax settings are configured, Shopify will add tax to your checkout page automatically for the affected states.

Registering for Sales Tax Permits

Before collecting tax, you need to register with the relevant state’s Department of Revenue or tax authority. Each state has its own application process, which usually involves providing your business name, address, and information about your products. 

Some states charge a fee to register. For example:

• Arizona: In Arizona, you must pay $12 to file for a transaction privilege tax (TPT) permit, which is the state equivalent of a sales tax permit. You may also have to register in certain local areas.
• Colorado: Colorado sales tax permits cost $63 and must be renewed every two years.
• Connecticut: Connecticut charges a $100 application fee for a sales tax permit.
• Florida: If you register online, there’s no charge. Paper applications involve a $5 fee.
• Hawaii: You have to pay a $20 fee to register for a General Excise Tax (GET) permit.

Once registered, you’ll receive a sales tax permit, which you’ll need to display if you’re physically operating in the state. You also must include the permit number when setting up tax collection in Shopify or using third-party tax software. Never collect tax without a permit, as doing so could lead to fines or legal action.

Collecting and Filing Sales Tax

After setting up tax collection in Shopify, your next step is to collect the tax at checkout and file returns with each state where you’re registered. Tax must be collected at the point of sale and remitted according to the schedule set by each state. Shopify helps by calculating rates based on customer location, but you’re still responsible for ensuring accuracy and submitting returns.

Filing frequency varies depending on how much tax you collect. States may assign you a monthly, quarterly, or annual filing schedule when you register for a sales tax permit. Filing deadlines usually fall on the 20th of the month following the close of the filing period, but this can vary.

To prepare your filings, download sales and tax reports from your Shopify dashboard. These should match the amounts you’ve collected and deposited. Compare your Shopify data with payment processor reports and bank statements to confirm everything lines up. If you’re using third-party tax software, it may auto-generate your filings and submit them electronically. Manual filers will need to log in to each state’s tax portal and complete the forms themselves.

Each return typically asks for total sales, taxable sales, tax collected, and any exemptions or deductions claimed. In some states, you must also break down tax collected by jurisdiction, such as counties or cities. Shopify may not track local tax collection in enough detail, so use caution and consider integrating more advanced reporting tools if you sell to many different areas within a state. If your business takes off, hiring a business tax preparation firm may make better sense for you.

Handling Exemptions and Resale Certificates

Some customers may be exempt from paying sales tax, such as nonprofit organizations, government agencies, and retailers purchasing goods for resale. These exemptions are not automatic; buyers must provide a valid exemption or resale certificate issued by the appropriate state authority before you can omit sales tax from the transaction.

Each state has its own version of these certificates, with varying rules about what information is required. Some states accept a standardized multistate certificate, while others insist on their own form. Certificates usually include the buyer’s name, business type, reason for exemption, and a signature. Many states also assign expiration dates, so you’ll need to confirm that each certificate is still valid at the time of sale.

Always collect and store these certificates before processing a tax-exempt order. If you don’t have one on file and a state conducts an audit, you could be held responsible for the uncollected tax, along with interest and penalties. Digital storage is the easiest way to manage these documents; create a dedicated folder on your computer or cloud drive, and name each file with the buyer’s name and certificate date. 

Shopify allows you to tag tax-exempt customers in your system and exclude them from tax calculations at checkout, which makes the process more efficient once proper documentation is in place.

Marketplace Facilitator Laws

Many states have laws that require marketplaces to collect and remit sales tax on behalf of third-party sellers. If you sell on platforms like Amazon or eBay, those platforms usually handle tax collection for you. However, Shopify is not a marketplace facilitator. You are considered the seller of record and must manage tax collection on your own.

Some sellers assume Shopify handles all sales tax needs automatically. It doesn’t. While it helps with calculating and charging tax, you remain responsible for registering, collecting, filing, and remitting the tax properly.

Remote Seller Considerations

Shopify sellers who operate without a physical location in a state still need to understand how economic nexus laws apply to them. These laws allow states to require tax collection from out-of-state businesses once certain sales or transaction thresholds are met. Even if you’re based in one state, your sales volume in another can create a tax obligation there.

For example, if you ship $100,000 worth of goods to Florida in a calendar year, you’ll need to register and collect Florida sales tax. Some states also have transaction thresholds, meaning that 200 small-ticket orders could trigger tax requirements. These rules are updated frequently, so it’s important to check state websites or use automation software that alerts you when a new nexus is established.

Product Taxability

Product taxability is another factor. While clothing might be taxed in one state, it could be exempt in another. Digital goods, services, and bundled items often have different classifications as well. Using the wrong category in your product setup can lead to undercollection or overcollection of tax, either of which can cause problems later.

Sourcing Locations

You should also be aware of origin-based versus destination-based sourcing. In origin-based states, you charge sales tax based on where your business is located. In destination-based states, you apply the rate based on the buyer’s address. Most states use destination-based sourcing, but there are a few exceptions. Misunderstanding this distinction can result in inaccurate rates being applied.

Managing these rules manually is possible, but time-consuming. Many remote sellers rely on tax software to flag new obligations, update rate tables, and automate filing. However, even with good tools, oversight is still required. You need to monitor your sales patterns, verify tax settings in your Shopify admin, and keep up with regulatory changes.

Given how many rules apply to remote sellers, it’s wise to work with a business tax preparation firm. An experienced team can help you evaluate where you need to register, set up compliance systems, and reduce your risk of audit or penalties. They can also manage multistate filings and keep your tax records in order, freeing you to focus on growing your business.

Common Audit Triggers

Certain activities can increase your chances of a sales tax audit, including:

• Inconsistent or missing filings
• Late payments
• Errors in tax collection

States may also launch audits if a customer reports incorrect tax on their invoice or if your business experiences a large jump in sales without updated registrations. Other red flags include: 

• Collecting tax without a permit
• Applying the wrong tax rates
• Failing to document exempt sales properly 

Keeping accurate records and reviewing your filings regularly helps reduce audit risk. Automation tools can also minimize manual mistakes, but as your sales go up, professional help may be your best option.

Tips for Staying Current

Sales tax rules change regularly. New laws, updated thresholds, or changes in product taxability can affect your responsibilities. Here are some tips for paying current:

• Subscribe to updates from the Department of Revenue in the states where you sell or use tax software that alerts you to changes.
• Keep your sales records organized, especially if you sell in multiple states. 
• Create a spreadsheet or dashboard that tracks your registration status, filing frequency, exemption certificates, and due dates. 
• Consider working with a tax advisor if you’re unsure about your compliance.

Do You Need Tax Support for Your Shopify Business?

Sales tax for Shopify sellers isn’t always straightforward, but it’s manageable when you understand your obligations. From determining where you have nexus to collecting the correct tax and filing on time, every step requires attention to detail, and bigger businesses can benefit from professional tax support.If you’d like help managing your Shopify sales tax responsibilities, USA Tax Gurus offers support tailored to your business. We support ecommerce companies across the globe, and can help you ensure greater accuracy in your tax collection, filing, and payment. Contact us today by filling out an online contact form or by calling 213-212-2210 to request a free consultation and learn how we can simplify your compliance and keep your business on track.