If you have the Plus subscription level with Shopify, Avatax is including in your subscription fees, all you have to do is set it up.
If you don't, then all you can do is use either Avatax or TaxJar for after the fact reporting. Either of these platforms will pull in the
orders you've already processed, then tell you what you "should have collected".
As stated by eComm Accountant, Shopify PLUS is required for Avatax integration.
However, Shopify native tax engine does a decent job of calculating the correct tax rate for general products. Tax overrides may be required depending on what kinds of items you sell on a state by state basis. TaxJar can be layered on top of Shopify to calculate rates.
It's difficult to provide a complete answer without knowing the full fact pattern.
My company, Goudy Square Consulting, focuses on helping companies solve sales tax compliance so they can focus on growing their business. I am a CPA/MST and available for a free initial consultation to understand your needs.
Hello Mike, sorry but I must disagree with your statement. For some states yes your are correct, but for others for example Colorado they miss the mark completely. Colorado and other states require sales tax to be calculated by geolocation. Alas Shopify uses the zip code method and this is completely unacceptable when calculating sales tax in a shopping cart. At least with Colorado they have confirmed Shopify will be held completely accountable for any errors when the audits do hit.
I was under the impression these audits would take place later, but with the current economic crisis the states are in due to the pandemic, I would plan an audits happening now to obtain their much needed sales tax revenues that have plummeted. Deb
Thank you for clarifying, Deb.
Sellers are are 100% responsible for any under collection. It comes down to making a business decision of how much to invest in a "perfect" solution (Shopify PLUS + Avatax) versus having an imperfect answer and paying the difference in under collection out of pocket.
It may be that a business should upgrade to Shopify PLUS and Avatax, but they may decide another sales tax solution that re-calculates the correct rates and paying the shortage owed out of pocket is a more economical solution.
Hello Mike, and once again I must disagree with you. I have contacted Colorado Dept of Revenue and have received a private letter ruling stating otherwise, so let's just agree to disagree.
I've been filing Colorado sales/use tax returns for over 20 years now, and I've saved my clients lots of money, here's an example....
Deb, it definitely seems you are an expert on Colorado.
I apologize if I wasn't clear, I agree it's the seller's responsibility. If there is any shortfall, the difference must be paid at the time of initial return filing to avoid the penalties and interest you outline in the letter you attached.