Shopify Sales Tax by State: Where to Collect, Who Files

Do I have to collect sales tax in every state with Shopify?

No. A state can require you to collect where you have a physical presence in it ("physical nexus") or where your sales into it pass its threshold ("economic nexus"). Shopify charges tax only in the regions you set up, so the store follows your decision and does not make it. Shopify's US taxes page (vendor documentation) says store owners can work out where they may be liable first, then configure the store to match.

A physical presence in a state generally requires registering there whatever the sales amount. Without one, the state's own threshold decides (Streamlined Sales Tax: remote seller guidance).

The case stops being simple when:

• the store ships into many states;
• the store and a marketplace both sell into the same state;
• stock sits in a warehouse or fulfillment center in another state;
• tax was collected only in the home state so far;
• tax was collected but a return was not filed; or
• a state letter or threshold warning has arrived.

Gather sales by ship-to state, month and channel; the list of state permits you hold; where your stock is held; and each marketplace's sales report.

Which states should I turn on in my store?

A state is generally turned on once you owe collection there and hold its permit. A state where you have no presence and its test is not met is generally left off, with its totals tracked.

Stock you keep in a state can also be a presence, whatever your sales total, and states differ. California says an out-of-state seller that stores inventory in a California fulfillment center must register (California CDTFA; see California sales tax nexus). Texas treats stock temporarily stored at a marketplace provider's facility on its own: above its $500,000 remote-seller safe harbor the seller needs a permit and collects; below it the seller needs none if the marketplace has certified it assumes a seller's duties. Either way, a taxable entity with stock there has Texas franchise tax responsibility (Texas Comptroller: marketplace FAQ).

With manual settings, you pick each state and rate yourself. Shopify's manual settings page lists automatic rate calculation from tax registrations among the features that manual rates lack (vendor documentation).

The order for each state:

1. Total your orders by ship-to state and month.
2. Check the state's test, presence or threshold.
3. Register with the state.
4. Turn the state on in the store.
5. Calendar each return, or enroll in automated filing and still check it.

Do I need the state's permit before I turn collection on?

Generally yes. Register with the state first, then turn the state on in the store. Shopify's manual tax settings page tells store owners to decide whether to charge sales tax before they start selling and, where they need to charge it, to register with each relevant agency (vendor documentation).

States tie collection to registration:

• Texas lists collecting tax on all taxable sales among a permit holder's duties, and charges no fee for the permit, though it may require a security bond (Texas Comptroller).
• Florida requires a seller of taxable goods to register as a dealer before conducting business in the state (Florida Department of Revenue).
• New York tests a remote seller at the end of each sales tax quarter (the last day of February, May, August and November). The seller files its certificate of registration within 30 days after the tests are met, counted from the end of the quarter that completed the tests, and the duty to collect begins 20 days after the registration deadline (Tax Law 1134; 1131). New York calls the registration a Certificate of Authority (New York Tax Department).
• Pennsylvania has an alternative: a seller with no physical presence may use an approved Certified Service Provider and needs no Pennsylvania sales tax license or returns of its own while it uses the provider (Pennsylvania Department of Revenue).

Registering creates a filing duty. An active Texas permit requires a return even with no taxable sales, and Florida requires a return even when no tax is due (Texas Comptroller; Florida New Dealer Guide). Register where you owe, and calendar the return dates that follow.

How do I know when my sales to a state reach its nexus threshold?

Measure each state by that state's own rule, and do not count on the store to warn you when a state's line is reached. Each state sets what counts, the look-back period and the start date. Four examples:

Sources: Texas, New York, Florida, Pennsylvania.

Other states differ. Many meet the line on sales or on transactions, either one, so count orders by ship-to state and month as well as dollars; some need both. Some count gross sales and some only taxable sales (Streamlined Sales Tax). Many measure the previous or current calendar year, so the duty can begin in the year the line is crossed. That chart is dated January 2023, so confirm each state with that state. Most states with a sales tax use a line of $100,000, but check each state. For every state's line, and which states have none, see sales tax economic nexus thresholds by state. The Texas and New York rules have their own guides: Texas and New York. To set up the totals in your books, see tracking sales by state for nexus.

Does Shopify file and pay my sales tax returns?

Not unless you use its automated filing, a service you set up for the store. Shopify's US taxes page says the store does not remit or file your taxes unless you use Shopify Tax and set up automated filing. Without it, the return, its due date and the payment are yours. With it, Shopify says it files the returns; confirm with Shopify, before relying on it, whether it also pays the tax for each state.

A store that collects tax at checkout and files nothing is still holding the state's money. Florida, for one, describes a registered dealer as the state's agent who holds collected tax as custodian until it is remitted (Florida New Dealer Guide).

People can also owe that tax personally. In New York, partners and LLC members, and officers, directors, managers or employees with a duty to act for the business, can be personally liable for tax imposed, collected or required to be collected, and where no return was filed the state can assess the tax at any time (Tax Law 1131; 1133; 1147). Other states set their own rules. For filing frequency and what to do about a missed return, see filing sales tax returns.

What does automated filing cover, and what stays with me?

Shopify says automated filing files monthly, quarterly, semi-annual and annual US sales tax returns for enrolled stores, using store data (vendor documentation). The same page says it is your responsibility to consult tax authorities or tax professionals to ensure you file and remit correctly.

Before relying on the service, confirm its eligibility rules, timelines and pricing, the state forms and IDs it needs, how each state's payment is handled, and what happens to your filings if the service ends.

Which reports give me the numbers for each state's return?

Shopify's US sales tax report summarizes sales and tax at the state, county and tax jurisdiction level. Its Jurisdiction report is meant for preparing a return yourself, and its Detailed transactions report shows each tax line on each order and can be exported to support an audit (Shopify: tax reports, vendor documentation).

Shopify's page says the US sales tax report is available to stores that use Shopify Tax in the United States. Its manual settings page lists advanced reports and tax liability insights among the features not available with manual rates (vendor documentation). A store on manual rates may need the order export instead.

A store report covers store orders. Tie each state's totals to the return and to the bank deposits (Shopify payouts and bank deposits).

How do marketplace sales next to my store count?

Sales through a marketplace can count toward a state's threshold even when the marketplace collects the tax, and the states differ.

Sources: Texas FAQ, New York, Florida TIP 21A01-03, Pennsylvania.

Keep each marketplace's written certification or terms. Texas says a seller who receives no certification should collect until one arrives, and keep marketplace sales records for four years (Texas Comptroller). The marketplace's collection covers its own sales; the store's checkout is separate.

I only collect sales tax in my own state: is that enough?

Only while no other state's test is met. If the store's sales into another state passed that state's line, the state's date to register and collect may already have passed.

Customers may owe use tax, the buyer's own tax on a taxable purchase made without tax charged (New York; Pennsylvania). The seller's own duty to register and collect starts on the state's date either way.

1. Total sales into each state by month for the current and previous years, split by channel.
2. Find the first month each state's own test was met.
3. Compare it with that state's start date, as in the table above.
4. Register where required, then deal with sales since that date. See catching up on uncollected sales tax.

I live in Florida and use Shopify: what do I set up first?

Register with the Florida Department of Revenue as a sales and use tax dealer before the store makes taxable sales in Florida. The application is online or on Form DR-1 (Florida Department of Revenue).

A registered dealer collects state sales tax plus any local discretionary sales surtax on each taxable transaction (Florida New Dealer Guide). Then turn Florida on in the store and add other states by the tests above.

How the tests work for your own state is in where you must collect sales tax. The rate at the delivery address is in sales tax sourcing and the ship-to address.

Where does the collected tax go in my books?

Tax collected for the state is generally held as a liability, not booked as sales. The IRS says state and local sales taxes imposed on the buyer, which you must collect and pay over, are not income (Publication 334, a guide for Schedule C filers). Florida says collected tax becomes state funds at the moment of collection and tells dealers to keep separate accounting (Florida New Dealer Guide).

A tax imposed on the seller instead is included in gross receipts (Publication 334), so check which kind your state's tax is. Keep one liability balance per state, so each return ties to a balance. For the entries, see recording sales tax collected and paid.

Example

These examples are illustrative. All amounts are in US dollars.

Ohio store, $600,000 into Texas

An Ohio store with no people or inventory in Texas ships $600,000 into Texas in twelve months, all through its own checkout. That is over the Texas safe harbor. On these facts it would need a Texas permit and would have to start collecting no later than the first day of the fourth month after the month it passed. If it passed in March, that is July 1.

In the store, Texas goes on only after the permit exists. The owner files the Texas returns unless automated filing covers Texas.

If the seller is a corporation, LLC or other taxable entity, Texas franchise tax is a separate duty, and the permit can start it: franchise tax nexus begins on the earliest of physical presence, the date the entity gets a Texas use tax permit, or the first day of the federal accounting period in which its Texas gross receipts reached $500,000 (Texas Comptroller). See Texas franchise tax.

Pennsylvania buyers, $120,000 in a calendar year

A store with no physical presence in Pennsylvania sells $120,000 to Pennsylvania buyers through its own checkout in year 1. Pennsylvania counts gross sales and has no sale-count test, so the store is over the line. Under Pennsylvania's rule it would have to be registered and collecting from April 1 of year 2. The owner registers first (or uses an approved Certified Service Provider, as above), then turns Pennsylvania on in the store, and prepares each return from the store's US sales tax report if the store uses Shopify Tax, or from its own state totals if not.

Small store, eight states

A store sells $40,000 into each of eight states and has no presence in any of them. The dollar amount is under the sales line in the four states above, but many states also, or instead, test the number of orders: $40,000 in $40 orders is 1,000 orders into each state. Suppose the orders are large enough that none of the eight states' sales lines or order counts is met. Then the threshold rule alone would not require collection yet. The owner totals orders by state each month and checks again, because the windows differ: twelve months in Texas, four quarters in New York, the calendar year in Florida and Pennsylvania, and in some states the current calendar year too.

Different for you?

• Your store ships into many states and you do not know which you owe, a state letter or threshold warning arrived, or you collected tax in some states and filed no return: the answer depends on each state's test, its start date and who files. Bring your sales by ship-to state, permit list, marketplace reports and any state letters to bookkeeping; for frequency and due dates, see filing sales tax returns.
• Your stock sits in a warehouse or fulfillment center in another state: stock can create a presence whatever your sales total. Bring your stock locations and state sales to bookkeeping.
• Your sales tax liability, store reports and bank deposits do not tie to your returns: see Shopify payouts and bank deposits, and bookkeeping if the gap spans several states or channels.
• Past sales went out with no tax: see catching up on uncollected sales tax.
• You need a state's exact line: see sales tax economic nexus thresholds by state.
• You are deciding who should file, in house, software or a CPA: see outsourcing sales tax filing.
• Your business is outside the US: see foreign sellers and US sales tax.