Quick answer: In the U.S., you generally have to collect sales tax in states where you have "nexus," meaning a sufficient connection to the state, which can come from a physical presence or from meeting a state's economic thresholds for sales or transactions. Shopify's tax settings can calculate and collect tax once you've registered and told Shopify where to collect, but deciding where you owe tax is your responsibility.
Important: this is general information, not tax or legal advice. Rules differ by state, change often and depend on what you sell. Talk to a CPA or sales tax professional for your situation.
Why it matters
Many new store owners ignore sales tax at first, then discover they owe back taxes in several states. The earlier you understand the basics, the cheaper it is to get right.
What "nexus" means
Nexus is a connection between your business and a state that obligates you to collect and remit that state's sales tax. You can create nexus in two broad ways:
- Physical nexus: you have an office, warehouse, inventory, employees or sometimes even a regular presence in the state. Using a fulfillment service that stores your inventory in another state can create nexus there.
- Economic nexus: following a 2018 U.S. Supreme Court decision (South Dakota v. Wayfair), most states now require out-of-state sellers to collect tax once they pass a threshold of sales or transactions in that state. Thresholds vary; a common one is $100,000 in sales or 200 transactions, but not all states use the same numbers.
Some states have no sales tax at all, and some product categories (such as certain groceries, clothing or digital goods) are taxed differently.
Marketplace facilitators
If you sell on marketplaces like Amazon or Etsy, they often collect tax for you on those orders. That doesn't cover sales through your own Shopify store, so you still have to handle your direct sales.
The basic process
- Figure out where you have nexus. Use your sales data by state (Shopify reports can help) and check each state's threshold.
- Register with the state's tax authority (often called the Department of Revenue) before you start collecting. Collecting tax without a permit is a problem too.
- Set up collection in Shopify.
- File and remit on the schedule the state assigns you (monthly, quarterly or annually), even if you collected nothing in a period.
- Keep records.
Where to set it up in Shopify
- Go to Settings β Taxes and duties.
- Choose the United States and add the states where you're registered to collect.
- Enter your registration numbers if prompted.
- Decide whether prices include tax (usually not for the U.S.; prices are tax-exclusive and tax is added at checkout).
- Check how shipping is taxed (it depends on the state).
- Review tax overrides for products that are exempt or taxed differently.
Shopify calculates tax based on the customer's address and the rates you've configured. Always test with a few orders to different states and compare results to expectations. Our payments, shipping and tax setup includes that test.
Reports you'll need
Shopify's tax reports show how much tax you've collected by jurisdiction. Your accountant or a filing service will use these. Some stores use dedicated tax automation tools to calculate, file and remit. They cost money, but they save time when you sell in many states.
Common mistakes
- Waiting until you're big to look into it.
- Collecting in a state without registering.
- Forgetting that inventory stored by a 3PL can create nexus.
- Not exempting wholesale customers with valid resale certificates.
- Assuming Shopify files returns for you. It calculates and collects but you (or a service) still file.
What about international and duties?
Selling abroad or importing involves VAT, GST and customs duties, which are separate topics. We touch on duties in our guide to tariffs and pricing and international selling in selling with Shopify Markets.
Next steps
- Export your sales by state for the last 12 months.
- Check each state's threshold. Your state's department of revenue website has it.
- Talk to a CPA about where to register.
- Then configure Shopify to match.
We handle the store side: tax settings, shipping, checkout and test orders. Send us a short brief if you'd like that set up and checked. Related: improving checkout conversion.
Frequently asked questions
Do I have to collect sales tax on Shopify?
Generally if you have nexus in a state, you must register and collect there. Shopify calculates tax once you configure it, but deciding where you owe tax is your responsibility.
What is economic nexus?
Since the 2018 Wayfair decision, most states require out-of-state sellers to collect tax after passing a sales or transaction threshold in that state. Thresholds vary by state.
Does Shopify file my sales tax returns?
No. It calculates and collects tax and provides reports. You or a filing service must file and remit.
Can inventory in a fulfillment warehouse create nexus?
It can. Inventory stored in a state may create physical nexus there, so ask a tax professional.
Related services
- Shopify Payments, Shipping & Tax Setup β payment providers, shipping rates, tax settings and test orders
- Monthly Shopify Store Management & Support β ongoing changes, fixes and check-ups each month
- Shopify Accessibility & Legal Pages Setup β accessibility fixes and clear policy pages
