New Shopify Tax app and extra hidden fees that sellers need to pay

merchant2010
Tourist
3 0 1

not sure if anyone has read the PR documents or help document about this newly launced Shopify Tax, where shopify will charge extra 0.35 % fee after 100K for tax calculation, something the system is already doing or some merchants are paying Avalara to do?

 

You can not opt out and this is only recommendation for taxes. I can not understand the logic. Sounds like creative way to charge merchants more.

 

Anyone can help me understand this better?

 

Screen Shot 2022-10-13 at 9.15.30 AM.png

Screen Shot 2022-10-13 at 9.39.37 AM.png

Replies 15 (15)

merchant2010
Tourist
3 0 1

read more here: https://www.shopify.com/tax

 

LBrod
Tourist
8 0 3

I am waiting to chat with customer service, but I have a few questions about this. I sell a lot of wholesale through Shopify, which is tax exempt. Will I still be able to mark things as tax exempt? Also will my wholesale orders count towards my $100,000 allotment since they don't need any tax calculated for them and therefore I'm not utilizing their services? I have had many conversations with Shopify on the phone and via zoom about sales tax issues, but this is not the result that I was expecting. It would really be so easy to give us access to a sales tax report - nothing else is needed.

OddNodd
Excursionist
18 1 17

Another cash grab by Shopify. This is absolutely unacceptable and disgusting. We will now be charged $1 each transaction once sales reach 100k? This will tank our B&M margins and profits, I cannot pay thousands of additional dollars to justify Shopify. Absolutely disgusting move on their part. 

LBrod
Tourist
8 0 3

Ok I just got back from chatting with Shopify - I'm here to share answers for anyone else that's curious. My major issues were about wholesale.

 

It was confirmed that I will still be able to make draft orders tax exempt for customers in my nexus state.

 

The value of my tax exempt wholesale orders will NOT count towards the $100,000 threshold for the Shopify tax fee.

 

All orders placed by retail customers in states where I do not have nexus WILL count towards the $100,000 threshold.

 

Just a reminder that the fee is 0.35%, or $0.0035 per dollar, so it will be $0.35 for each $100 transaction. This caps at $0.99 an order, which would be an order of $280 or more. This also means that if, for example, I sold $200,000 a year that is $100,000 over the threshold, at 0.35% that would be about $350. This number could be lower if you have someone spending over $280 in an order because the fee would cap at $0.99. $350 a year divided by 12 months would be about $30 a month. If they have clear and concise tax reports that will take me a matter of minutes and not hours to figure out my state taxes, I wouldn't be so mad about the $30 a month (assuming I sold $200,000 a year). I am, however, going to start keeping an eye out for other sales platforms as these fees add up.

bryan76
Trailblazer
196 3 42

it is a relief that this won't effect tax exempt orders if I am hearing you correctly, but maybe moving on from Shopify to another platform is the ultimate answer

SalesTaxGreer
Tourist
5 0 2

As I read the details, it appears this charge will only apply in those states where you are charging and collecting tax.  For example, you may only have the requirement to charge and collect sales tax in your home state, sales into other states (assuming you are not required to collect sales tax) would not be subject to this additional fee.

bryan76
Trailblazer
196 3 42

I have several different businesses.  If I want to scale my current retail business it will get to the point that it would be more cost effective to change platforms since this fee does not help my business in any way.

LBrod
Tourist
8 0 3

I don't believe that is correct. This is what customer service told me when I asked, and I take it to mean that all sales are subject to the new fee, except tax-exempt sales. If it's a taxable order, even if you don't actually collect sales tax in that state, I believe it will have the fee applied.

Screenshot 2022-10-13 145532.jpg

bryan76
Trailblazer
196 3 42

so once you hit $100k in sales Nationally it will effect all taxable orders even if you don't have Nexus in the state?

LBrod
Tourist
8 0 3

Seems like it.

TylerKing
Tourist
8 0 36

This is incredibly disappointing, and yet another example of Shopify deciding to charge for something that was already a feature. This will cost us over $10,000 / year, just to have them do something they were already doing. Between this, and having to pay to have POS pro, and them keeping CC fees from returned items, it feels like Shopify is in a cash grab, and it may be time to start looking elsewhere. I am beyond disappointed with this.

 

bryan76
Trailblazer
196 3 42

I am not there yet but for $10k a year you might as well start building out your site on another platform 

LBrod
Tourist
8 0 3

They cap it at $5,000 in fees a year 😕

merchant2010
Tourist
3 0 1

For reference: what this new thing is doing is exactly what Shopify currently has to do which is calculate and charge taxes according to your settings similar to Amazon and all the other platforms. Now Shopify found a creative way to get extra money out of millions of sellers for the required service they are currently doing.

 

AGHGAdmin
Shopify Partner
1 0 1

https://help.shopify.com/en/manual/taxes/shopify-tax#opting-out-of-shopify-tax 

 

If you read the details, you can actually opt out of this and more or less maintain the current setup. The Legacy platform has small gaps that could create sales tax liability at the household level, along with a more complicated process to charge correct tax on certain product categories.  I think that is outside the concern of most sellers.

 

This was going to cost us $5K a year on shopify pro, which is pretty unacceptable to spring on sellers.  The liability gaps we will incur for our specific business are below those levels, so it was a no brainer to opt out.  For 8 figure sellers or specialty product sellers, this might have more value, otherwise it looks like a fee grab for sellers that aren't paying attention to bolster slowing shopify revenue growth.