Filing Taxes is one of the most complicated aspects of running a business. It becomes even more complex with fluctuating tax laws and regulations. It becomes burdensome to keep up with the changing tax rates and file the taxes on time. This troublesome process might have made you think that it would be amazing if someone else completes your tax filing process for you.
If you are running an online store with Shopify and wondering the same then let’s clear the confusion, this is not possible.
Managing the Taxation
Shopify does not take responsibility for filing or remitting your sales taxes. To manage sales tax, you may need to register your firm with your local or federal tax authority.
Although Shopify can take your stress and help you with tax filing. Shopify provides its customers with calculations and reporting that make things a lot easier. Most routine sales tax calculations can be handled automatically by Shopify. You can also use tax overrides to deal with certain tax rules and scenarios.
Shopify uses a variety of default sales tax rates that are changed on a regular basis. If you utilize the default rates, double-check that they are current and accurate for your specific situation. You have the ability to override them at any time.
To ensure that you charge your customers the correct sales tax rates and that you file and remit the taxes appropriately, you should always consult a local tax office or a tax accountant.
If you’re new to Shopify, you’ll need to decide whether or not to charge sales tax before you begin selling. It’s possible that you’ll need to register with several different taxing authorities. After that, you may use Shopify to set up your taxes so that you can charge the exact rates wherever you sell in the US.
The tax liability in the US is decided by the nexus. You are liable to pay taxes according to the physical nexus and economic nexus. So if you need to charge sales tax in one or more US states, then you must contact and register with each of the applicable agencies. The procedure varies depending on where your company is based and where you sell, as well as the regulations of the various governments.
You can set up your taxes when you’ve registered with the tax offices and received your sales tax ID. Here are few steps to setup you Sales Tax.
Steps to Set-Up Tax Calculation In Shopify
To save you from tax stress Shopify has simple steps to set up taxes. Follow these easy steps to set up taxes.
Go to ‘Settings > Taxes’ in your Shopify admin. Click Set up or Edit next to the United States in the Tax Regions section. Click Collect sales tax or the three-dot button next to the region you want to update in the Sales tax collection section. Update your account numbers and territories. Select Collect sales tax from the drop-down menu.
Note: If you are new to Shopify, then you will also need to enter your sales tax ID.
Certain products may not be subject to the default tax rates. Certain sorts of children’s apparel, for example, maybe tax-free or have a lower tax rate. You’ll need to build an override if the default rates don’t apply.
It takes two steps to create a product override. To begin, build a collection that includes all of the products with varying tax rates. Then you select the zone the override applies to, as well as the tax rate that will be used.
1st Step – For creating a collection, Go to Products > Collections in your Shopify admin. After that, click Create a collection and give it a name. Select Manual as the collection type. Save the collection by clicking the Save button.
2nd Step – For creating the override, Go to Taxes in the Settings menu. Select Edit next to the United States in the Tax Regions section. Click Add a product override in the Tax overrides section. Choose a collection. Choose the area where the override will take effect. Enter the tax rate for that region’s collection. Save the file.
You can manage several options that affect how tax is computed on your products. You can choose whether taxes are included in your prices if you want to charge VAT on digital goods and if you want to tax delivery costs. The Taxes settings page is where you manage these options. For further information, see Tax Overrides and Exemptions.
Go to Taxes in the Settings menu. There are four options available in the Tax Calculation section which are:
- All prices are inclusive of tax.
- Include or exclude tax based on your customer’s country
- Charge tax on shipping rates.
- Charge VAT on digital goods.
Though Shopify does not remit taxes, it uses default sales tax rates which are updated from time to time. It also helps you in tax calculation according to where you live. You just need to make sure that the default tax rates are current and correct for your situation.