Shopify Sales Tax Requirements

If you are selling through Shopify or your own website, you may have crossed the economic thresholds in several states, which means you have a responsibility to register for a sales tax permit, update your Shopify tax settings (or shopping cart), and collect and remit sales taxes.

Even as a non-resident selling in the U.S., it is essential to protect your brand and profits by knowing when to register so your customer pays the sales tax, not you.

Note for Non-Residents: You may have been told the only way to register for U.S. sales tax is through a U.S. company. That is not true.

NCP can set up a U.S. company for Walmart or U.S. insurance, but it is NOT required to register for sales tax.

It takes longer as many states do not allow us to register online; we need to mail the application to the states. And we do partner with Avalara, Taxjar, and others, but most can not file your sales tax returns unless you can do an ACH pull through a U.S. bank account requiring a U.S. entity. We work with a provider that can file your sales tax returns without a U.S. bank account on your foreign entity.

BUT… we have another option with a partner firm that can do all your sales tax registrations and wire the sales tax due.

What are the economic thresholds?

If you make over $100K in sales in a state or have over 200 separate transitions in the current or prior calendar year, you may have economic nexus and be required to get a sales tax permit. Some states, like California and Texas, only have thresholds of $500K in sales.

Update on economic nexus thresholds changes: Maine removed the 200 transactions in January of 2022 and South Dakota in July 2023, and Louisiana in August 2023.

Warning: Do NOT turn on the tax settings for states where you have crossed the thresholds BEFORE registering with a sales tax permit.

Collecting tax without a permit is illegal and could be considered tax fraud. At this point, you must get registered.

Methods to Calculate When You Cross Nexus Thresholds:

There are four methods states for you to use to determine when you cross economic nexus thresholds in each state.

If you are a Shopify seller, this is why you have seen more updates on your sales tax liability dashboard since January because your company has crossed economic nexus thresholds during the previous calendar year.

  1. Previous calendar year: This means you count sales up until the end of December for that state to determine if a company has crossed economic nexus. If yes, you are responsible for collecting and registering in January next month (and year) moving forward. If you do not cross that state’s economic threshold in December, you can wait another year and recheck the following December.
  2. Previous calendar year OR current calendar year: You check sales the previous year until December, or at any point during the current calendar year, you would register. But you do not cumulate sales from the previous year. If you did not cross economic nexus thresholds in that state by December, you start at zero sales again in January and see if you cross the thresholds at any month during the current calendar year, and if you do, register the following month. Some states say you must register the following day, the following transaction, 30 days…This is the most common method by states.
  3. Prior 12 months: You only look at the prior 12 months at any time. Each month you would need to calculate the sales for the previous 12 months to determine if you cross economic nexus thresholds in any state. Includes CT, IL, MN, MS, TN, TX, and VT.
  4. Prior four quarters (only NY): You only look at the previous four quarters and check every quarter to see if you crossed the economic nexus threshold in NY, which includes $300K in sales AND 100 transactions.

Reminder, if you are a marketplace seller only, such as on Amazon, or Walmart, the marketplace collects and remits on your behalf (in almost all the states).

Don’t rely solely on Shopify’s sales tax tool to help determine when you cross thresholds because there are limitations, especially if you sell on a marketplace such as Amazon or Walmart.

Shopify Tool Limitation

What to learn more first about our registration process?

Here are our updated sales tax registration options and pricing with our sister brand, Sales Tax System.

Our fees are $125 per state for our comprehensive service, including if you don’t have an SSN. State fees may apply to some states.

If you don’t have an SSN, in some states, if we have to mail your sales tax application, an additional $10 fee per state will apply.

After you fill out our sales tax application, we will let you know your state and mailing fees and which states you want us to register you.

If you want to know your total costs upfront, please send us an email with the states you want to get registered.

We are partnered with all the sales tax firms that file sales tax returns from the software companies and those that provide a more hands-on experience. We can refer you to them after the registration process to help save you time and money.

Economic Nexus Map with Methods to Calculate for Shopify Sellers

Register below, and we will send out an automatic email with an overview of the basics of sales tax compliance in the U.S. You will receive a chart simplifying sales tax and a video overview plus steps for compliance.
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