How to Set Up Taxes in Shopify

To ensure your Shopify store collects taxes correctly, you'll need to set up your tax settings based on your location and where you sell. Below are the steps to configure taxes properly:

Step 1: Enable Automatic Tax Calculations

Shopify provides automatic tax calculations for many regions, including the U.S., Canada, the EU, and others. To enable this:

  1. Log in to your Shopify Admin.
  2. Go to Settings > Taxes and Duties.
  3. Under Tax regions, select the country where your business is based.
  4. Click Collect sales tax and follow the on-screen instructions.

Step 2: Set Up Tax Rates for Different Locations

  • If Shopify supports automatic tax calculation in your region, it will populate tax rates automatically.
  • If your country/region isn’t covered, you may need to enter rates manually.

For manual tax setup:

  1. In Settings > Taxes and Duties, select the country/region.
  2. Click Add tax rate and enter the correct percentage.
  3. Save changes.

Step 3: Set Up U.S. Sales Tax (If Applicable)

In the U.S., you must collect tax in states where you have nexus (physical presence, economic activity, or employees). To configure:

  1. Under Settings > Taxes and Duties, click United States.
  2. Click Collect sales tax and enter the states where you need to collect tax.
  3. If applicable, add a tax-exempt category for certain products (e.g., clothing in some states).
  4. Save changes.

👉 Shopify will automatically calculate taxes for supported states, so no need to manually enter rates.

Step 4: Add VAT for International Sales (If Needed)

If you sell in the EU, UK, or other regions that require VAT:

  1. Go to Settings > Taxes and Duties.
  2. Click European Union (or your region) and enable VAT collection.
  3. Enter your VAT number (if you have one) to apply proper tax rates.
  4. Save changes.

💡 If you don’t charge VAT, make sure you understand the tax regulations of the countries you ship to.

Step 5: Display Taxes at Checkout or Included in Prices

  • By default, Shopify adds tax at checkout.
  • If you prefer to include tax in product prices, go to Settings > Taxes and Duties, then check "Include taxes in prices".
  • Save changes.

Step 6: Set Up Tax Overrides (If Necessary)

Some products (e.g., food, books) have special tax rates. To set overrides:

  1. Go to Settings > Taxes and Duties > Tax overrides.
  2. Click Add product override and select the relevant items.
  3. Enter the custom tax rate.
  4. Save changes.

Step 7: Verify and Test Tax Calculations

  • Place a test order to check tax calculations.
  • Adjust settings if necessary.

Need to Register Your Business?

If you don’t have an LLC or business entity registered yet, you can easily set one up online with Bizee. They handle all the paperwork to get you legally set up. Click here to get started:
👉 Register Your Business with Bizee

Final Notes:

✔ Shopify does NOT remit taxes on your behalf—you’ll need to file and pay taxes manually.
✔ Consult a tax professional to ensure compliance, especially for international sales.

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