how to collect taxes on shopify

Shopify sales tax setup for stress-free compliance | Walk-through guide Hi, Shopify sellers. This is


Updated on Jan 11,2023

Shopify sales tax setup for stress-free compliance | Walk-through guide

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Shopify sales tax setup for stress-free compliance | Walk-through guide

Hi, Shopify sellers. This is Kexin from LedgerGurus.,And today I'm gonna talk to you about sales tax settings in your Shopify store.,I know this is not the most exciting topic,,and it's just another admin task to add to your list. But trust me,,if you can set this up correctly,,then you are on a really good path to be compliant with sales tax,,and you don't have to pay much out of your pocket.,So before we dive into the content,,if you haven't done so please subscribe to our channel and hit that bell,,so when we get new videos published, you will get notified.,So at LedgerGurus,,we help so many e-commerce clients with their e-commerce accounting and journal,entries and transaction coding and bank reconciliations. But at the same time,,we also have a dedicated sales tax team that manage,everything that's relating to sales tax for these customers.,So I'm in Shopify all the time,,and I do these sales tax settings for my clients day in and day out.,So this is really my arena to share my experience with you guys. Please,comment if you have any questions and we'll be sure to get back to you,on those questions. So, today I'm gonna talk about two things.,The first is how does sales tax work with Shopify?,Who's collecting it? Is Shopify like Amazon?,And then the second part is I'm gonna walk you through the things you need to,make sure you finish setting up on your Shopify store to be sales tax,compliant. So to answer the first question,,we get lots of inquiries on,what's Shopify? How does Shopify deal with sales tax?,And the answer is Shopify is not like Amazon or Etsy or Walmart or another,marketplace facilitator,,where you can just hand over the responsibility to,them for, to collect and to remit tax to the different states.,If you are selling on Shopify,,every sale that goes through Shopify is your responsibility to collect,and remit sales tax. So Shopify's not gonna do it for you.,You have to do it yourself.,Shopify's not gonna turn on those settings for you automatically.,You have to turn them on yourself.,So then let's talk about how to turn on those settings.,There are five things that,,over the years of my struggle with Shopify, that I've figured out.,So I hope that this is really helpful to you guys.,So,,the first thing is to enter the places you want Shopify to collect sales tax in.,So you would go to settings and you go to Taxes and then you go to US,store. And then that's where you can add all the states.,If you are one of the older Shopify users, you need to add a zip code.,If you are using the new interface, which I really like,,then you don't have to enter the zip code.,You just need to enter your sales tax license and then the,state. And, then sometimes it asks you which way of sourcing you want.,So we can talk about sourcing another time.,So that's the first thing is you need to tell Shopify where to collect tax.,The second thing is after step one, if you go back out of US,,if you go to settings and then taxes, if you scroll down,,so it's below all the different countries,,you can see a box that says automatically calculate tax on shipping.,Some states charge shipping, some states don't.,So you would need to check this box, so,Shopify will calculate tax on shipping. And then for the states that you,know, are not taxing shipping,,you need to go in and add a tax override for shipping in that,specific state.,The third thing is you want to make sure all your taxable products are,collecting sales tax. So to do this,,you need to go to your products and go to each products. You,can edit each variant and then somewhere in the middle,,there's a box that says charge tax on this product.,You want to check that for the products you that are taxable,,some products are not taxable, for example, gift cards. Those are not taxable.,So you would not check the box for those products.,Then the fourth thing is you want to add all your locations in from where the,fulfillments are going through.,So your warehouses that are fulfilling these orders that are,sold through your Shopify store. So you would go to settings and locations.,And at all of those...The reason that this is important for sales tax is because,some states are origin sourcing. Some states are destination sourcing.,So depending on where the goods are shipped from,,if it's an intra-state, transaction,,meaning if it's shipped from the state to a customer in the same state versus,shipped from one state to another state,,the rates are very different and where to look for those rates are different.,So it's important to put the location of your warehouse there.,And the last thing is exempt customers. If you sell to,exempt entities, or if you sell to,like wholesalers that are gonna use your products for resale,,then those are all legitimate reasons to exempt sales tax for certain,customers.,And thus you would go to customers and you go edit this customer's information,and you check the box to say, this is an exempt customer.,And you can also give a reason on why this is exempt.,So to just summarize - five places, first,,you need to tell Shopify where to collect sales tax.,Then you need to configure shipping options. And then third,,you need to make sure your products are all collecting tax for the,taxable products. And fourth, you need to add locations of your warehouses.,And the last thing is to add information for your exempt customers.,Let me know if you have any questions,,feel free to leave comments and for sure to get back to them.,If you like this video, please like it.,Share it with your fellow Shopify users.,Hope you all have a good day and I'll see you soon. Bye.

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