Do I Need to Collect Sales Tax If I Sell on Shopify?

Published: [DATE] | Author: Taxero | Reading time: 8 minutes
URL slug: /blog/do-i-need-to-collect-sales-tax-on-shopify

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Yes — if your Shopify store has crossed an economic nexus threshold in a state, you are legally required to collect and remit sales tax for orders shipped to buyers in that state. Shopify is not a marketplace facilitator for your own storefront. It calculates tax rates and can configure collection for you, but it does not register you with any state, and it does not file or remit taxes on your behalf. That responsibility is yours.

This guide explains exactly what Shopify does and doesn't handle, which states you probably owe, and what to do next.

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What Shopify Actually Does (and Doesn't Do)

Shopify is outstanding software. It calculates the correct sales tax rate for every order and can collect that tax from your buyers at checkout — once you've turned on tax collection in your settings. But that's where Shopify's responsibility ends.

Shopify does not:

• Register you with any state tax authority
• File your sales tax returns
• Remit the collected tax to any state on your behalf
• Tell you when you've crossed a nexus threshold

That money sits in your Shopify Payments balance or your payout account. The responsibility to send it to the right state, on the right schedule, is entirely yours.

This surprises a lot of Shopify sellers. It's not a knock on Shopify — it's just how direct-to-consumer storefronts work, versus marketplace platforms like Amazon or Etsy.

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The Economic Nexus Rule: When You Owe Sales Tax

The rule changed permanently in 2018. In South Dakota v. Wayfair, the U.S. Supreme Court ruled that states can require out-of-state sellers to collect and remit sales tax — even with no physical presence in that state — once sales to that state's customers cross a threshold.

The standard threshold: $100,000 in annual sales to buyers in a state, OR 200 separate transactions to that state.

Most states use the $100,000 / 200 transaction standard. But not all:

| State | Threshold | Notes | |-------|-----------|-------| | Texas | $500,000 | Revenue only. No transaction count. | | California | $500,000 | Revenue only. No transaction count. | | New York | $500,000 AND 100 transactions | Both conditions must be met. | | Kansas | No minimum | Any sale creates nexus. | | Most other states | $100,000 OR 200 transactions | Either condition triggers registration. |

Once you cross the threshold in a state, you have a legal obligation to:

1. Register for a sales tax permit in that state
2. Configure Shopify to collect tax from buyers in that state
3. File a sales tax return on schedule (usually monthly or quarterly)
4. Remit the collected tax to the state by the filing deadline

Failure to register, collect, or file carries penalties — in most states, 10% of tax due or a flat fee (whichever is greater), plus interest that compounds monthly.

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Which States Do Shopify Sellers Usually Owe?

If you're shipping physical products to customers across the U.S., you likely have nexus in more states than you realize. The states that hit Shopify sellers most frequently:

California ($500,000 threshold) — The largest ecommerce market in the country. Complex due to local district taxes on top of the 7.25% state rate. If you're doing serious volume, you may be approaching this threshold faster than you think.

Texas ($500,000 threshold) — Second-largest state market. High threshold makes it more forgiving, but compliance matters once you're over.

New York ($500,000 AND 100 transactions) — The AND logic is buyer-friendly: you must cross both thresholds. High revenue with few orders, or many low-dollar orders, may not trigger NY registration.

Florida ($100,000 threshold) — Activated in July 2021. Many Shopify sellers are already past this threshold without realizing it.

Washington, Colorado, Georgia, Virginia, Michigan — All at $100,000. These states actively audit marketplace sellers.

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What Happens If You Haven't Registered Yet?

If you've been selling on Shopify for more than a year and shipping to customers in multiple states, there's a real chance you've crossed thresholds without registering. This creates a "back-filing" exposure: you technically owe tax for every period since you crossed the threshold, even if you weren't collecting it from buyers.

Here's the good news: most states have a Voluntary Disclosure Agreement (VDA) program. If you come forward before the state contacts you, you can typically:

• Limit your back-liability to the past 3-4 years (vs. a full audit going back further)
• Get penalty waivers
• Set up a clean-slate filing going forward

Coming forward proactively is almost always better than waiting to be found.

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How to Check Your Nexus Position Right Now

You don't need to guess. Taxero's free nexus dashboard lets you connect your Shopify store and see — in minutes — which states you've crossed or are approaching. No credit card required.

What the dashboard shows:

• Every state where you have active nexus (must register now)
• Every state where you're approaching the threshold (register before you cross)
• Filing schedules for each registered state
• Estimated tax liability by state

Once connected, Taxero handles state registration using a Power of Attorney — you don't need to log into any state portals or fill out any forms.

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Step-by-Step: Getting Sales Tax Compliant on Shopify

1. Audit your nexus — Connect Shopify to Taxero (or manually run your sales-by-state report for the past 12 months) to see which states you've crossed.

2. Register in triggered states — Taxero handles this automatically. If you prefer DIY: search "[state name] sales tax permit registration" and go directly to the state's Department of Revenue.

3. Enable collection in Shopify — Go to Shopify Admin → Settings → Taxes and Duties. For each state where you're registered, turn on collection and confirm you've entered your sales tax permit number.

4. Set your filing schedule — Check your permit confirmation (or Taxero's dashboard) for your assigned filing frequency: monthly, quarterly, or annual. Mark every due date.

5. File and remit on time — Either file directly on each state's DOR portal, or use Taxero to prepare and submit automatically.

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Frequently Asked Questions

Q: Does Shopify automatically collect sales tax?
A: Shopify can collect sales tax at checkout once you configure it, but only in states where you've turned on collection. It does not register you with any state, and it does not file or remit taxes. You must configure it and manage the compliance.

Q: I only sell in my home state. Do I still owe sales tax in other states?
A: If you ship physical goods to buyers in other states and have exceeded that state's economic nexus threshold, yes — you owe sales tax there regardless of where your business is located. The Wayfair ruling eliminated the physical-presence requirement.

Q: What's the penalty for not collecting sales tax I owe?
A: Penalties vary by state but typically start at 10% of the tax due, plus interest (often 0.5%–1% per month) on any unpaid balance. States like California and New York actively audit ecommerce sellers using third-party data.

Q: My Shopify sales are below $100K in most states. Am I safe?
A: For most states, yes — the standard $100,000 threshold means you have no obligation until you cross it. But Kansas has no minimum threshold (any sale creates nexus), and you may have physical nexus in states where you've attended trade shows, have a warehouse, or have employees or contractors.

Q: Does Shopify's marketplace facilitator status protect me?
A: No. Shopify does not function as a marketplace facilitator for your own store. Marketplace facilitator laws cover platforms like Amazon, Etsy, and eBay that process payments on behalf of third-party sellers. Your Shopify store is your store — you own the compliance obligation.

Q: How often do I have to file?
A: It depends on your sales volume in each state. Most states assign monthly filing for sellers doing above a certain volume, quarterly for mid-range, and annual for low-volume. Your assigned frequency is set by the state when you register.

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The Bottom Line

Shopify gives you a powerful sales tool. Sales tax compliance is still your responsibility.

The framework is simple: cross $100,000 in sales to buyers in a state (or $500,000 in Texas and California) and you need to register, collect, and file there. Missing that obligation creates a growing liability — but catching up is very doable if you start now.

Connect your Shopify store to Taxero → — see your exact nexus position in minutes, free.