Today we're excited to announce a new feature that's been in the works for some time now. Introducing automatic tax calculations by zip code! This new feature for shops in the United States will automatically apply the correct tax rates based on the purchaser's zip code.
The US has 50 states all with different tax rates. Kind of annoying. Within each of those states, there are counties with different tax rates, and cities with their own tax rates. The tax rates often vary between counties, cities, and sometimes even between neighbouring zip codes. Yikes!
So in order to simplify the whole process, we've gone ahead and outfitted the Shopify system with a tax database from the professionals at Tax Data Systems, who do this sort of thing for a living. As a Shopify store owner, you now have the ability to enable automatic tax-rate lookups for any state.
Great! I want it!
If you're brand-new to Shopify, it's already enabled in your shop. If you're an existing Shopify merchant, you'll have to enable it manually, but don't worry, it's super easy. Watch this quick video that explains exactly how to set it up:
If you have trouble viewing this video please click here.
Q & A
What states do I need to charge tax for?
The federal requirement is that you charge taxes in any state you have a physical presence. Please consult a tax professional for any further information on whether or not you need to charge sales tax in a specific state.
Is shipping taxed?
This depends on what state the purchaser is in, and is part of our tax database. In the future this may also depend on whether or not you include handling or padding in your shipping costs, but at the time of writing this does not currently affect it.
Can I change whether or not shipping is taxed?
No. Whether or not to tax shipping is part of the tax law.
Can I change the tax rate?
No. We are using an accurate database that is frequently updated and contains the correct tax rates. It would be unwise to change that. If you have a concern that there is a mistake in our system, feel free to contact us and we will help you get to the bottom of it.
You guys are amazing. I believe this is often overlooked by many shop owners when building out their e-commerce sites…I know it’s something that constantly comes up with the shops that we develop.
This is such an awesome feature, and having it work out of the box is just another way that you’re separating Shopify from all the other e-commerce systems out there.
Thanks, keep being awesome!
Next up: shipping calculation by zip code? We use Shopify to sell floral arrangements and plants online, but we only deliver within a specific area near our shop. It would be awesome if we could upload a list of zip codes and prices, and the correct shipping rate would be automatically applied in the checkout. Keeping my fingers crossed for this! Thank you for all your hard work.
Thanks for this feature. This was something I’ve been missing. Good job on continuing to improve and widen the gap from your competition.
Is the rest of the world being integrated?
This is great news. We sell satellite equipment for radio & TV stations, for years we have had to charge tax based on the zip code, however the online story wouldn’t drill it down to the zip code. We are very glad this is in place now.
What about zip code and product type? sometimes certain types of products (such as food) are not taxed while others are.
@sam Canada next. Any specific request?
@jonathan: coming up!
Great idea except…if you use carrier shipping rates and add any padding to the quote even with “charge sales tax on shipping” selected the shipping is NOT taxed. reported to Shopify, but unclear when/if a fix is coming.
Also, does not correctly calculate California sales tax. Charges everyone in California the rate based on seller’s zip code which is incorrect, sales tax depends on the BUYER’S location within the state and whether or not they are in the same district as the seller. Reported this to Shopify but getting differing responses from support. One told me it’s a bug, another said it’s not and there’s no plans to fix/change.