Understanding sales tax is one of the biggest headaches for new Shopify store owners. Terms like “Shopify sales tax,” “tax collection,” and “tax reports” appear all over forums and help docs, but it can still be confusing to know what you’re really responsible for, and how much Shopify helps with. In this guide, we answer the most common real-world questions, with simple explanations and direct actions you can take.

1. Does Shopify Collect Sales Tax for You?

Short answer: Shopify gives you the tools to set up sales tax, but you’re still responsible for configuring it correctly and filing/remitting the tax to the state.

When you run a store on Shopify, you need to collect sales tax in any state where your business has “nexus” (a tax connection), usually your home state, and potentially others if you have large sales volume. Shopify has a built-in tax engine that will automatically calculate sales tax on your products if you enter your business location and turn on the tax settings.

However, the key point is:

• Shopify calculates and can collect sales tax at checkout

• But Shopify does NOT automatically pay or file those taxes to the state for you (except in special cases with Shopify “Marketplace Facilitator” laws, which usually apply to big marketplaces, not individual stores)

You need to:

• Register for a sales tax permit in your state (e.g., Texas comptroller for Texas sellers)

• Enable tax collection in Shopify admin

• Remit (pay and file) the taxes you collect to the correct state department on time

2. How to Set Up Sales Tax in Shopify

A lot of sellers ask: “Do I need to set up taxes for Shopify?”
Yes. Unless you strictly sell only tax-exempt items, you need to set up your state tax collection in Shopify.

Basic steps:

1. Go to your Shopify Admin > Settings > Taxes and Duties

2. Add your store’s location and any states where you need to collect tax

3. Shopify will use local rules and calculate the correct tax at checkout for each order

If you have physical or economic nexus in other states (revenue or transaction volume crosses a threshold), add those states too. Not sure? Start with your home state and research expand as you grow.

3. Shopify Sales Tax Report: Finding and Using It

Shopify offers built-in sales tax reports, which are essential for bookkeeping and staying compliant.
To access your Shopify sales tax report:

• Go to Shopify Admin > Analytics > Reports

• Under “Taxes”, you can view and export sales tax collected, which you’ll need for filing your state sales tax return

This data is especially useful at the end of every month or quarter when preparing your filings. Make it a habit to download or review this regularly so you don’t miss deadlines.

4. Dropshipping and Shopify Sales Tax

One of the most googled questions:
“Do I need to charge tax on Shopify when dropshipping?”

• If you have nexus in a state (sales presence, office, warehouse, or you cross the state’s economic threshold), you must register and collect sales tax on orders shipped to customers in that state, even if you never touch the product.

• If your supplier is handling fulfillment from out-of-state, it’s still usually your responsibility to tax your end customer.

• Some suppliers offer a “resale certificate” program so you don’t get charged sales tax twice (ask your dropshipping supplier for details).

• Always check your home state’s rules for dropshippers. A local CPA or Shopify-savvy accountant can help clarify tricky cases.

5. Common Pitfalls & Easy Wins

• Not registering for the right state permit: If you sell in Texas, register with the Texas Comptroller. For other states, check their sales tax department.

• Not filing taxes that were collected: It’s illegal to collect tax and not remit it. Schedule reminders to file even if you had zero sales that period.

• Assuming Shopify “takes care of everything” : Remember, you set it up, you file it—Shopify just does the math.

6. Practical Tips

• Always collect your sales tax reports for bookkeeping (how to find the Shopify sales tax report)

• Review your tax settings after major platform/account changes

• For multi-state sales, consider a third-party tax app (like Avalara or TaxJar, but check costs vs. your sales volume)

• If confused, work with a CPA familiar with e-commerce and your state

Conclusion

Handling Shopify sales tax doesn’t have to keep you up at night. Start with your home state, set up Shopify’s tools, track your sales tax report, and keep a regular filing schedule. If you’re unsure about multistate, dropshipping, or compliance details, reach out for expert help before you get stuck!

Need more help?

• See our Accounting Services for Shopify

• Get personalized tax guidance for your ecommerce business