When your business starts to reach more customers in more places, it means you’re doing something right. But with great success comes great responsibility: more conversions means you have more obligations to register, collect, and pay sales tax.
Growing your business should be a cause for celebration, not added stress. That’s why we created Sales Tax Insights for the US and Canada. With Sales Tax Insights, you can easily track where you may be required to collect and pay sales tax, receive guidance on how to register with the proper tax agencies, and begin collecting taxes on orders in that area.
How does Sales Tax Insights work?
Let’s face it: sales tax is complicated. In the United States alone there are over 11,000 tax jurisdictions and tax rates, many with unique rules and regulations that determine when your business needs to collect and remit sales tax. Rules are determined by time frame, number of transactions, and total dollar amount of sales, and vary from state to state. In Canada, things are a bit simpler, with some sales taxes imposed at the federal level and only a handful of local sales tax jurisdictions.
Sales Tax Insights takes the stack of rules and requirements needed to determine when you’re required to collect Canadian GST/HST and US state sales tax and automates it for you.* Through the Taxes page in your Shopify admin you can see which locations you’re obligated to collect tax in, and which you may soon cross tax thresholds in. From there, you can find helpful links to relevant tax agencies where you can register and find answers to any questions you may have.
Where can I find it?
From your Shopify admin, go to Settings → Taxes. If you currently have sales in either country, you’ll be able to select either the United States or Canada. Your potential obligations will be displayed in one of three categories:
- Action required: Locations where you may currently have a tax liability.
- Monitoring required: Locations where your Shopify sales have reached at least 80% of the location’s threshold requirement.
- No action required: Locations where your Shopify sales do not reach the location’s threshold requirement.
You can view more details on how these determinations are made by visiting our help articles for the United States and Canada.
What are the next steps?
After you’ve reviewed Sales Tax Insights and confirmed your obligations with a tax professional, congratulate yourself on this impressive milestone. While no one (except maybe your accountant) enjoys dealing with taxes, reaching a new economic threshold means you have an established base of customers who believe in your business. Well done!
Next, register with the relevant tax authority. On your Tax Insights page you’ll find links to the relevant tax authority or you can find a complete list of tax authorities here. Once registered, you can get started by selecting Start collecting taxes and providing your tax ID. We also recommend speaking with your accountant or tax adviser at this point to ensure you:
- Understand your tax obligations
- Register properly
- Know when and how to remit your taxes to the relevant authorities
It’s important to remember that tax insights are limited to the transactions that occur within Shopify. Sales through other ecommerce sites, or marketplaces such as Amazon or Wayfair, may count toward your thresholds, and physical locations may also impact your tax status.
While Shopify is committed to helping you navigate the complexities of managing a business, every company is unique. You should always consult with your local tax authority or tax professional to ensure your business is in good standing.
We’re here to help you succeed
At Shopify, we’re committed to helping you start, run, and grow your business. As rules and regulations change, we’re working hard to help you stay on top of your tax game. Because when understanding your tax obligations is a breeze, you have more time to focus on making your business a success. Let us know in the comments what else you’d like to see.
- Taxes in the Shopify Help Center
- US taxes
- Review your US tax liabilities
- Canadian taxes
- Review your Canada tax liabilities
*This guide is for merchants who sell in the US and Canada. United States tax insights analyze obligations at the state level. Some cities or counties have separate requirements not currently incorporated into the insights tool. The Canadian insights analyze obligations at the Federal level (GST/HST). Some provinces have separate requirements not currently incorporated into the insights tool.
It's your responsibility to consult with local tax authorities or a tax professional to verify that you charge your customers the correct tax rates, and to ensure that you file and remit your taxes correctly.