As an online retailer, it is your responsibility to make sure you collect and pay whatever taxes are required by the jurisdictions in which you sell. Shopify can help to some extent, by making it easier for retailers to establish tax rates within their stores. Generating regular reports also make it possible to verify that the appropriate amount of tax has been collected and paid.
You can set up tax rates for all of your countries either automatically or manually. The automatic process is implemented by default. Keep in mind that the Shopify team does its best to make sure all tax rates are up to date inside the platform. Retailers should still verify tax rates to guarantee they are collecting the right amount of tax.
Setting up Tax Rates Automatically
Setting your default tax rate automatically is extremely easy. In fact, when you first start up your Shopify store, the system establishes your default rate based on your country of residence. These rates apply to all POS transactions. To change or verify your default tax rate, navigate to Settings>Taxes.
This will open the taxes page, where you can verify your rates and make changes. In the upper dialogue box, there will be three options available:
- All taxes are included in my price
- Charge taxes on shipping rates
- Charge EU Digital Goods VAT Taxes.
Each option has a check box next to it for your convenience. Simply check the ones that apply to you. Once done, look in the dialogue box below to verify the tax rate applied to your default jurisdiction is accurate.
Setting up Tax Rates Manually
Selling to any countries outside of your primary jurisdiction requires setting up tax rates manually. To do so, you will first have to create a new shipping destination for each country requiring tax set-up. Go to your admin panel and navigate to Settings>Shipping. Next, go to the ‘Shipping rates’ section and click ‘Add shipping zone’. You’ll be offered a list of countries via a drop-down menu; choose your new country and click on it.
You will be able to modify each country you add to set both national tax rates and separate rates for individual regions, where applicable. We encourage you to check the option on the Taxes page (as explained above) to include taxes in all your prices. This guarantees that you never fail to collect enough from customers to meet your obligations.
Removing a country and its associated tax rate is easy should you decide to no longer do business in that country. Just reverse the process you used to set up the country manually. Go to Settings>Shipping> Shipping zones. Just remove the country you no longer need and save your settings.
Collecting and paying taxes is one of your obligations as an online retailer. Shopify makes it easy to keep track of things within your store, but it’s still your responsibility to make sure things are done correctly.