The 5 things you're responsible for

Shopify Tax is useful, but it only covers part of the compliance process. Here's what falls on you:

1. Knowing where you have nexus

"Nexus" is the legal threshold that triggers your obligation to collect sales tax in a state. There are two types:

Economic nexus is based on your sales volume or transaction count into a state. Since the 2018 South Dakota v. Wayfair ruling, most states have these laws, meaning you can owe tax even with no physical presence. Thresholds vary: California and Texas are $500,000 in sales, while most states are $100,000 or 200 transactions. Some count only taxable sales; others count everything including exempt items.

Physical nexus is triggered by having a physical presence in a state: a warehouse, office, retail location, or employees working there. Even a single remote employee can create nexus in their state.

Shopify Tax does monitor both types of nexus. Its liability insights track your economic nexus by showing sales volume by state, and it monitors physical nexus for any business locations you've added in Shopify. However, there are gaps: Shopify only knows about locations you manually enter, so if you hire a remote employee in a new state, you'd need to add that location yourself or use a solution that syncs with your HR system. And if you sell on other channels (Amazon, wholesale, a separate website), you'd need to manually import those sales into Shopify to get an accurate nexus picture. Without that, you're only seeing part of your exposure.

2. Registering to collect sales tax

Before you can legally collect sales tax in a state, you need a permit from that state's department of revenue. Shopify doesn't handle registration. You apply through each state's website, track your applications, and manage renewals yourself.

Some states issue permits instantly, while others take weeks. If you start collecting before you're registered, you can face penalties.

3. Filing returns on time

Each state has its own filing frequency (monthly, quarterly, or annually), its own forms, and its own deadlines. January 20th in one state might be January 31st in another. Miss a deadline and you owe penalties and interest, even if you collected the right amount.

Shopify does offer automated filing if you set it up through Shopify Tax. Once configured, Shopify can file your returns automatically for US states. However, there are limitations: automated filing only includes orders processed through Shopify Tax (not other tax services or apps you may have used), it doesn't support sales from all channels, and you're still responsible for ensuring your setup is correct and complete.

4. Remitting payment

If you use automated filing in Shopify Tax, remittance is included: Shopify will debit your specified payment account and submit payment to state tax authorities on your behalf. If you're not using automated filing, the sales tax you collect stays in your bank account until you send it to each state yourself.

5. Keeping audit-ready records

If a state audits you, you need documentation: what you collected, what you remitted, exemption certificates for tax-exempt customers, and records showing how you determined taxability. Shopify stores transaction data, but compiling it into audit-ready format takes work.

What Shopify Tax does well

Shopify Tax isn't a complete solution, but it handles calculation and collection effectively:

Address-level tax calculation. When a customer checks out, Shopify Tax determines the correct rate based on their shipping address.

Automatic rate updates. Tax rates change constantly. Shopify keeps its rate database current so you don't have to track changes manually.

Product taxability. Shopify Tax applies different rates based on product type. Clothing might be exempt in one state and taxable in another. Digital products have their own rules. Shopify handles this effectively if your products are categorized correctly.

EU and UK VAT calculation. For international sellers, Shopify Tax supports VAT rates, VAT invoices, and One-Stop Shop (OSS) registration for EU sales. However, filing and remittance are still on you.

Cost: Free up to $100,000 in US sales annually, then 0.35% per order (0.25% on Shopify Plus), capped at $0.99 per order.

Setting up Shopify Tax: a complete checklist

Here's the step-by-step process to set up tax for your Shopify store:

Check your nexus status in Shopify

1. Go to Settings > Taxes and Duties > United States > Manage tax collection
2. Review states by status: Action required, Monitoring required, and No action required
3. Click Show details on any state to see thresholds and how close you are

If you sell on other channels, remember to factor in those sales manually. Shopify only tracks what it can see.

Register for permits where you have nexus

For each state where you've crossed thresholds, apply for a sales tax permit through that state's department of revenue.

Set up product categories

Not all products are taxed the same way. Go to Taxes and Duties > United States > Tax Rates and Exemptions > Product Category and assign each product to the correct category (exercise & fitness, health & beauty, software, etc.). Shopify uses these to apply the correct tax treatment by state.

Handle tax-exempt customers

If you sell to customers exempt from sales tax, go to Customers, select the customer, and uncheck Collect tax. Collect and store exemption certificates, since you'll need documentation if audited.

Verify locations

Confirm all locations you ship from are listed in Settings > Locations. Shopify uses these for sourcing rules.

Enable tax collection

1. In Manage tax collection, click Collect sales tax for each state that you're registered in
2. Enter your sales tax ID and click Collect sales tax

Important: Don't enable collection in states where you aren't registered. Collecting without a permit creates legal complications and doesn't actually make you compliant.

Know your filing frequency

Each state assigns a filing schedule (monthly, quarterly, or annually) based on your sales volume. Deadlines vary by state and can change due to new legislation.

Ongoing maintenance

Check nexus thresholds regularly, update product categories when you add new SKUs, collect exemption certificates proactively, and keep registration IDs current.

3 scenarios where adding Anrok makes sense

Shopify Tax handles calculation and collection well. Here's when layering on additional automation pays off:

1. You're selling across multiple channels

You have a Shopify store, but you also sell on Amazon, do some wholesale, and maybe have a separate site for B2B orders. Shopify Tax only sees your Shopify sales.

Your nexus obligation is based on all your sales into a state, not just one channel. If your Shopify sales to Massachusetts are $60,000 and your Amazon sales are $50,000, you've crossed the $100,000 threshold. But Shopify only shows you the $60,000.

The risk: You miss nexus in states where your combined sales have crossed thresholds, and you're not collecting tax on any of your Shopify orders there.

2. You're spending many hours every month on sales tax

As you grow into more states, the administrative work compounds. Each state means another registration to manage, another filing calendar to track, another return to prepare. Some states are monthly filers, others quarterly, others annual, and the deadlines don't align.

Even with Shopify's automated filing, you're still responsible for setting up each state correctly, monitoring for issues, and handling anything that falls outside what automation covers. If you sell on other channels, you're reconciling data across platforms. If you have exempt customers, you're managing certificates.

The value of automation: A solution that handles the entire process, from monitoring and registration to filing and remittance across all your channels, can reduce sales tax from a multi-hour monthly task to something you check occasionally. Most Anrok customers spend a few hours per month on sales tax after switching from manual processes.

3. You're growing fast and crossing thresholds regularly

Last quarter you had nexus in eight states. This quarter, strong sales pushed you over the threshold in four more. Next quarter, you might hit another three.

Every new state means a registration application, a new filing calendar to track, another return to prepare. Shopify's liability insights require you to check manually; there's no alert when you cross. If you're not checking weekly, you might not realize you've triggered nexus until you're months behind on collection.

The risk: Back taxes. You owe tax on every sale you should have collected from the day you crossed the threshold. You can't go back and charge customers, so it comes out of your margin.

When to keep using Shopify Tax alone

Manual compliance with Shopify Tax can work if:

• You have nexus in three or fewer states
• You sell only through Shopify (no other channels)
• You have time to check liability insights monthly
• You're comfortable preparing and filing returns yourself (or paying your accountant to do it)

For a store doing $300K/year with customers concentrated in a few states, the time investment might be manageable: maybe 5-10 hours per month depending on filing frequency.

When it's time to automate

Consider a dedicated sales tax solution when:

• You're filing in over five states. The administrative load compounds quickly. Each state has different forms, deadlines, and rules.
• You're crossing new nexus thresholds every quarter. Proactive alerts become essential when your exposure is constantly changing.
• You sell on multiple platforms. You need consolidated visibility across Shopify, Amazon, wholesale, and any other channels.
• You're spending more than a few hours per month on sales tax. That time has a cost, and errors have a bigger cost.
• You're planning to raise money or sell the business. Investors and acquirers look at sales tax compliance during diligence. Gaps create problems.

What to look for in a sales tax solution

Not all platforms are equal. Here's what matters:

End-to-end coverage. The best solutions handle monitoring, registration, calculation, filing, and remittance, not just one piece. Stitching together multiple tools creates data gaps.

Proactive nexus alerts. You should know when you're approaching a threshold, not find out after you've crossed it.

Multi-channel consolidation. If you sell on Shopify and other platforms, your solution should pull data from all of them.

No-code Shopify integration. You shouldn't need engineering time to connect. Look for native integrations that sync orders automatically.

Real tax expertise. Software handles the automation. Humans handle the edge cases. Make sure you have access to people who understand tax rules.

Predictable pricing. Per-filing fees and transaction charges can spike unpredictably as you grow. Understand the full cost at scale.

How Anrok works with Shopify

Anrok connects to your Shopify store and handles sales tax compliance from monitoring through remittance.

What happens when you connect:

• Your Shopify orders sync automatically
• Anrok maps your exposure across all 50 states plus 11,000+ local jurisdictions, including home-rule cities
• You get alerts when you're approaching nexus thresholds
• When you need to register, you can initiate the process directly from the dashboard
• Returns are prepared automatically and filed by US-based tax professionals

For multi-channel sellers: Anrok consolidates data from Shopify alongside other platforms, including Stripe, QuickBooks, and whatever else you're using, so you see your complete nexus picture in one place.

What customers say: Most Anrok customers spend a few hours per month on sales tax after switching from manual processes. Brands like beehiiv, Dollar Flight Club, and 1Password use Anrok for their compliance.

Want to see your current exposure? Talk to our team for a walkthrough of the platform and a review of where you stand today.