If you’re a US merchant, you’re most likely required to pay sales tax according to state and local laws. Here’s how you can set up your Online Store so that you are able to collect, report, and file sales tax properly.
Sales tax is applicable to the sale of most products and some services in most states. The rates and rules notably differ from state to state. For example, California has the highest state-level sales tax rate at 7.5 percent. The lowest sales tax is in Colorado, which has a rate of 2.9 percent.
In order to know which taxes apply to your business, please use this helpful State Sales Tax Map.
Setting up automatic US tax rates
If you need to charge tax within the United States, then different taxes might apply in your city, county, and state. To reduce complexity and the risk of errors, you can use automatic tax settings. These tax settings use standard general sales tax rates, which are updated regularly.
When automatic tax rates are enabled:
- Your store automatically calculates tax rates depending on your state tax law, store, and customer location.
- Your store stays up to date on the tax law: once tax laws are changed in your state, county, or even city government, your store will "know" the new rules and apply them at checkout. No actions required on your side.
To enable automatic US sales tax:
- Add your company address in your dashboard > Settings > General > Store profile.
- Enable automatic tax calculations in your Online Store dashboard > Settings > Taxes:
Once the automatic tax rates are enabled, your store will charge the right tax rate depending on where you and your customers are located.
If our automatic tax feature doesn’t cover your needs entirely, you can set up taxes manually. Follow the steps outlined in this tutorial.
Handling tax-exempt customers
If you don't want to collect tax from some of your customers, for example, non-profit organizations or wholesalers, you can mark them as tax-exempt on the Customers page in your store admin.
This feature is available on all Online Store plans.