Shopify is a popular eCommerce platform that allows users to set up their own online stores. Unfortunately, some users have reported that Shopify is not charging taxes on their transactions. This could create significant financial issues for these users if they are not aware of the tax implications of their business activities.
Are Shopify Sales Taxable?
Shopify is a great platform for businesses of all sizes, but it can be confusing to figure out if your sales are taxable. Here’s a look at whether Shopify sales are subject to taxes in the United States.
Sales made through Shopify are classified as “commerce transactions.” This means that, under US tax law, Shopify sales are generally taxable. However, there are a few exceptions that would allow you to avoid paying taxes on your Shopify sales.
One exception is if you’re registered as a personal use business (PUB). Under this scenario, your Shopify sales are not considered commerce transactions and therefore are not taxable. PUBs are businesses that use the internet primarily for personal purposes, like communication or recreation. You can find out if you’re a PUB by checking with the IRS.
Another exception is if you make less than $20,000 in annual revenue from Shopify sales. In this case, your Shopify sales would be considered “intangible items” and would not be taxable. Intangible items include things like copyright or trade secrets. You can find out more about how intangibles are taxed by reading IRS Publication 535, Tax
Shopify Tax Filing
If you run a business on Shopify, you may be wondering why your business is not being charged sales tax. Shopify is a cloud-based ecommerce platform that allows businesses to sell products and services online without having to set up their own website or store. Unfortunately, this means that many businesses run on Shopify don’t have to pay taxes on their sales.
There are a few reasons why this could happen. First, if your business is based in a country that doesn’t have a sales tax, then Shopify won’t charge it for you. Second, if your business only sells digital products, then Shopify may not charge you sales tax because it classifies them as services rather than physical goods. And finally, if you sell through an intermediary such as eBay or Amazon, then those companies may not charge sales tax either.
If you think that your business should be charging taxes, there are a few things that you can do to make sure that happens. First, make sure that you are registered with the relevant government agency and file the necessary paperwork. Secondly, make sure that all of your products and services are taxable under the law in your country.
How Does Shopify Calculate Taxes?
Shopify charges taxes according to the applicable tax laws in each country where they have customers. For example, Shopify charges sales and use taxes in the United States, VAT in Europe, and GST in Canada.
Shopify also has partnerships with various tax authorities, such as the Canada Revenue Agency (CRA), so that customers can easily submit their tax returns through the Shopify platform.
Why Shopify Doesn’t Charge Sales Taxes in Some States
Shopify doesn’t charge sales taxes in some states because they don’t have to. Delaware, Montana, New Hampshire, and Oregon are just a few of the states where Shopify is exempt from sales tax.
Shopify is also exempt from value-added tax (VAT) in many countries, including the United Kingdom, Germany, and France. This means that Shopify doesn’t have to charge customers any additional taxes on their orders.
The only time Shopify does have to charge sales taxes is when a customer is using their Shopify store to sell products or services through an online marketplace like eBay or Amazon. In these cases, Shopify will charge the customer sales tax based on the state where the marketplace is located.
How to Fix This Problem
If you’re like most Shopify merchants, you may be wondering why your shop isn’t charging sales tax. There are a few possible reasons why your store may not be charging taxes, and this guide will walk you through how to fix the problem.
If you’re using Shopify’s default settings and your state requires it, your shop must charge sales tax. However, there are a few other factors that can influence whether or not your shop charges sales tax:
-Your Shopify plan type – If you’re using a paid plan, then you likely won’t have to charge taxes; if you’re using a free plan, then your shop may not charge taxes because Shopify takes care of this for you.
-The countries that your store is sold in – If your store is only sold in one country, then that country is likely responsible for collecting and depositing sales tax on behalf of Shopify.
-The state in which your store is located – If your store is located in a state that doesn’t require sales tax to be charged, then Shopify will likely not charge taxes on behalf of you. Ultimately, it’s up to each individual merchant to determine what level of sales tax they’d like to charge.
If you’re not sure whether your store is charging sales tax or not, you can check out our guide on how to find out.
Conclusion
If you’re like many Shopify merchants, you may be wondering why your store isn’t charging sales tax. In recent years, there’s been a rise in online shopping and as a result, more states are looking to collect taxes from online retailers. However, not all ecommerce platforms are created equal – some don’t charge sales tax at all! If you’re running an online shop on Shopify and aren’t charged sales tax by the state in which your store resides, it might be time to check into switching to a platform that does charge taxes.
