Sales tax for Shopify sellers: the basics.

This guide explains the general ideas. Rules differ by state and province and change over time, so confirm your obligations with an accountant or the tax authority.

Sales tax isn't revenue

When you charge a customer sales tax, you're collecting it on the government's behalf. It belongs in a liability account (money you owe), not in revenue. Mixing the two inflates sales and makes the tax bill a surprise.

United States: nexus

You have to collect a state's sales tax once you have nexus there. Physical nexus comes from things like an office, staff or inventory in the state. Since the 2018 South Dakota v. Wayfair decision, states can also apply economic nexus: once your sales into the state pass a threshold, you must register and collect, even with no physical presence. Many states set the threshold at $100,000 of sales a year; some also count the number of transactions. Each state sets its own rules.

Marketplace sales

Under marketplace facilitator laws, marketplaces such as Amazon, Etsy, eBay and TikTok Shop collect and remit sales tax on sales made through them. That tax never becomes yours to pay. Sales on your own Shopify store are different: you're responsible for those.

Canada: GST/HST and provincial taxes

In Canada, businesses generally must register for GST/HST once taxable sales pass $30,000 over four consecutive calendar quarters (the small supplier threshold). Some provinces add their own sales tax (PST or QST), and a few combine it with GST as HST. You can usually claim back the GST/HST you paid on business costs.

What to track every month

• Tax collected, by state or province
• Tax refunded to customers (refunds and lost chargebacks)
• Tax you paid to the government
• What you still owe, per jurisdiction

Metreks tracks all four automatically from your orders and bank, and shows what you owe by state or province, without asking you to pick a tax rate on every transaction. See the sales tax report.