Shopify Tax Collection: How to Create Tax Rates and Add Them to Your Products

ByJill Selling on Shopify

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Collecting taxes for your Shopify store can be a complex process, but it’s important to get it right in order to comply with legal requirements.

This article will provide a step-by-step guide to creating tax rates and adding them to your products in Shopify, covering everything from setting up your tax settings to customizing your tax rates based on location.

We will cover topics like:

How To Charge Tax On Shopify

To charge tax on Shopify, you’ll need to set up your tax settings in your Shopify store.

Here are the steps to set up tax in Shopify:

  1. Go to your Shopify Admin: Log in to your Shopify account and click on the “Settings” option in the bottom-left corner. Then click on the “Taxes” option.
  2. Enable Taxes: If you haven’t already, you’ll need to enable taxes in your Shopify store by toggling the “Taxes are enabled” switch to the “On” position.
  3. Add a Tax rate: To add a tax rate, click on the “Add tax rate” button and enter the information for your tax rate, including the name of the tax, the tax rate, and the country or state for which the tax rate applies.
  4. Specify Tax Options: You can choose to include tax in your prices or to add it during checkout. You can also choose to include shipping charges in your tax calculation.
  5. Save Your Settings: After you’ve added your tax rate, be sure to save your changes by clicking on the “Save” button.

It’s important to note that tax laws vary by country and state, and you may need to consult a tax professional to determine the tax rates that you need to charge and the information that you need to collect from your customers.

Once you’ve set up your tax settings, Shopify will automatically calculate and charge the appropriate tax on orders placed in your store. You can view your tax reports in your Shopify Admin to see how much tax you’ve collected and to ensure that you’re charging the correct amount of tax.

How To Set Up Tax On Shopify

To set up tax on Shopify, follow these steps:

  1. Go to your Shopify Admin: Log in to your Shopify account and click on the “Settings” option in the bottom-left corner. Then click on the “Taxes” option.
  2. Enable Taxes: If you haven’t already, you’ll need to enable taxes in your Shopify store by toggling the “Taxes are enabled” switch to the “On” position.
  3. Add a Tax rate: To add a tax rate, click on the “Add tax rate” button and enter the information for your tax rate, including the name of the tax, the tax rate, and the country or state for which the tax rate applies.
  4. Specify Tax Options: You can choose to include tax in your prices or to add it during checkout. You can also choose to include shipping charges in your tax calculation.
  5. Save Your Settings: After you’ve added your tax rate, be sure to save your changes by clicking on the “Save” button.

It’s important to note that tax laws vary by country and state, and you may need to consult a tax professional to determine the tax rates that you need to charge and the information that you need to collect from your customers.

Once you’ve set up your tax settings, Shopify will automatically calculate and charge the appropriate tax on orders placed in your store. You can view your tax reports in your Shopify Admin to see how much tax you’ve collected and to ensure that you’re charging the correct amount of tax.

How To Do Tax Free Weekend On Shopify

To do a tax-free weekend on Shopify, follow these steps:

  1. Login to your Shopify store.
  2. Go to the “Settings” section and select “Taxes”.
  3. Click “Edit” for the tax rate you want to modify.
  4. Change the tax rate to 0% for the dates you want to have a tax-free weekend.
  5. Save your changes.

How To Turn Off Sales Tax On Shopify

To turn off sales tax on Shopify, follow these steps:

  1. Log in to your Shopify store.
  2. Go to the “Settings” section and select “Taxes”.
  3. Disable the “Charge taxes on this sales channel” toggle.
  4. Save your changes.

Please note that disabling sales tax may not be in compliance with local tax laws and regulations, and it’s important to consult with a tax professional or government agency before making changes to your tax settings.

How Should I Tax When I Sell On Shopify

When selling on Shopify, it’s important to correctly apply taxes to your sales to remain compliant with local laws and regulations.

It is not something that Shopify will cover for you. Shopify do accounting and bookkeeping for you, but everything else – depends on you (your business actually).

How To Find Sales Tax Collected On Shopify

To find sales tax collected on Shopify, follow these steps:

  1. Log in to your Shopify store.
  2. Go to the “Orders” section.
  3. Use the search and filter options to locate the orders you want to view.
  4. Click on an order to view its details.
  5. Look for the “Tax” section on the order details page, which displays the amount of tax collected for that order.

You can also view a summary of your sales tax collections for a specific period by using the Shopify “Reports” feature. To do this, follow these steps:

  1. Log in to your Shopify store.
  2. Go to the “Reports” section.
  3. Click on “Taxes” under the “Finance” category.
  4. Use the date range selector to choose the period you want to view.
  5. The report will show you a breakdown of sales tax collected by province, state, or country.

These reports can be helpful in determining your tax liabilities and keeping track of your business finances.

Do You Need To Pay Taxes On Shopify

Yes, you may need to pay taxes on your sales made through Shopify, depending on your location and the laws and regulations of your jurisdiction.

In most countries, online businesses are required to collect and remit sales tax on their taxable sales. The amount of tax you need to collect and pay depends on the tax laws of your location and the type of products or services you sell.

It’s important to consult with a tax professional or government agency to determine your specific tax obligations when selling on Shopify. Failure to properly collect and remit sales tax can result in fines, penalties, or other legal consequences.

How Do I Avoid Paying Taxes On Shopify

It is not advisable or ethical to avoid paying taxes when selling on Shopify or any other platform. Tax avoidance is illegal in most countries and can result in fines, penalties, and other legal consequences.

Instead, it is recommended to consult with a tax professional or government agency to understand your tax obligations and ensure that you are collecting and remitting the correct amount of sales tax on your taxable sales.

Consulting with tax professional might give you ideas on how you can pay less taxes (most countries have taxes discounts), but not paying taxes might cause unwelcome consequences.

Conclusion

Every online store must have good accounting for taxes. Fortunately, Shopify has this integrated on their platform and you usually don’t need to buy any expensive software to track that.

I hope in this article you have figured out everything about taxes, now you can head into other areas like managing locations for Shopify store items or browse for other Shopify articles.

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Jill is the founder of Selling Online Simplified. She is a 7 figure ecommerce business owner and consultant to product based businesses. She has owned, operated and sold ecommerce sites and blogs online for the past 12 years. She is also a wife, mom of 3 kids & 1 dog.

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