General tax set-up steps

Setting up tax is different in each country. Generally, it follows the same steps:

1. Determine where you have an obligation to collect tax. This typically starts with your default location and where you operate your business from. This is usually your home country, province, or state.
2. Register with the appropriate state or country.
3. Start to collect tax in each state or country.

After you activate tax collection, review the following considerations:

• If your products have reduced rates or tax exemptions, then do one of the following:
  • If you use Shopify Tax, then make sure you've set the product category field for your products. Shopify Tax determines tax rates and applies exemptions or altered tax rates according to your product categories.
  • If you don't use Shopify Tax, or you need to use a tax rate not accounted for by Shopify Tax, then you can set tax overrides manually. You can set specific products as tax exempt and set tax overrides for products or shipping by using collections.
• If you have customers that are exempt from taxes, then you can change the tax settings in their customer profile.
• If your store uses B2B, then you can add a tax ID or VAT number to company locations and apply relevant tax exemptions.
• You need to file a return with the state or region you're registered in, based on the filing cadence provided by state or region when you register. This is typically on a monthly, quarterly or annual basis.

As you set up taxes, you can access and review your settings on the Taxes and duties page in your Shopify admin. Your sales are monitored to help identify when you have additional tax obligations in other states or countries, also known as nexus.

Before you start collecting taxes in your admin at Settings > Taxes and duties, review the following considerations. Watch the following video for a visual on how set up US taxes.