Shopify

3 Quick Tips for Optimizing Sales Tax Collection on Shopify

by Mark Faggiano

Sales Tax 101 for Shopify Sellers

TaxJar and Shopify are an unbeatable team when it comes to collecting sales tax, creating sales tax reports, and remitting them to your state. In honor of a match made in heaven, we thought we’d provide 3 quick tips for making sure you’re optimizing your sales tax collection on Shopify.

Don’t Include Sales Tax in Prices

Shopify gives you an option on whether or not to include the sales tax in the price of your item.

We recommend you don’t do this. U.S. shoppers are accustomed to paying sales tax, but they’re also accustomed to seeing that amount tacked on at the point of sale, not while shopping. Say, for example, you see a candy bar listed at $1.00 (without sales tax listed in the price) in one store, but at $1.07 (with sales tax listed in the price) in another store. While you may end up paying the same amount for the candy bar at the register, the $1.00 candy bar “feels” cheaper.

It’s easy for your customers to shop around online, so don’t give them any excuses to favor a competitor’s store over yours!

Charge Sales Tax on Shipping When Applicable

Some states require that you charge sales tax on shipping costs as well as the price of products. If you have a nexus in a state that charges sales tax on shipping, you can set that up in Shopify. Here’s how to set that up in Shopify:

  1. Go to Settings
  2. Click on Taxes
  3. Scroll down to “Tax Settings”
  4. Check the checkbox next to “Charge taxes on shipping rates”
  5. Click Save Changes

Set Tax Overrides

Some items are sales tax exempt in some states. For example, many states don’t require sellers to charge sales tax on food items. If you sell tax-exempt items, you can set this up in Shopify:

  1. Go to your admin page
  2. Click on the Collections page
  3. Create a collection and give it any name you like
  4. Decide if you want the collection to be visible or hidden
  5. Click Save

Now you need to apply a tax override to the collection you just set up.

  1. Go to Settings
  2. Click on Taxes
  3. Scroll down to “Tax Settings”
  4. Click Add tax override
  5. Click the name of the country you wish to add the override to
  6. Click Choose collection
  7. Select the collection you intend to make tax exempt, for example the one you just created above
  8. Under the Location header, check all boxes you want an override for (city, county, etc.)
  9. Under the Tax rate header, enter the amount of tax you want to charge for each level
  10. You can check the “Applies to all counties and cities” box if you want to exempt the taxes for products in this collection for everyone in the state
  11. Click Save Override

That’s it! Now all products in the override will be exempt from sales tax for the parameters you’ve set.

You should be good to go with all your sales tax collections through Shopify. For much more about how TaxJar and Shopify work together, see our new Sales Tax 101 for Shopify Sellers guide.

Do you have any other questions? Ask away below or visit TaxJar.com!

  • paintaddict

    or shopify can add a simple customer exemption and solve all this. Adding tax in the price is stupid yeah lets make the price higher cause shopify wont handle this matter. Real smart

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