Retiring a legacy United States Point of Sale sales tax service for retail point-of-sale merchants

[Jacqui]

In October and November, we’re retiring a legacy United States tax service that’s sometimes been referred to as “Registration-based tax settings”. The legacy service was built before the current Nexus rules were established in the United States, and is based on an older model of sales tax calculation. It served its purpose at the time, but sales tax and technology has come a long way since then. This out-of-date service struggles to help merchants run a fully-compliant business. So we’re retiring it to focus on developing services that support the new realities of sales tax. If you’ve been collecting tax on Point of Sale your store will automatically be upgraded to Shopify Tax, which offers the highest level of compliance with the least amount of upkeep. With Shopify Tax, you’ll have access to:

• The most accurate collection at checkout: Collect the most accurate tax rate for every purchase, based on your store’s precise address and any product exemptions. This lowers your risk of paying back-taxes to the state from your profits.
• New advanced reports: No more days wasted on finding the details you need to file. View your sales tax data broken down by state, county, and jurisdiction for less hassle at filing time.
• Automatic updates: Shopify Tax keeps track of state rules, so you stay compliant through constant regulatory changes. When rates or rules change, your tax calculations stay up-to-date. Plus, Shopify Tax automatically adjusts rates to account for sales tax holidays. 

Though the upgrade itself happens automatically, there are a few things to be aware of:

• Shopify Tax calculates sales tax at a much higher level of precision than legacy services. This, combined with the ability to automate product exemptions based on product categories, means there’s no longer a need to set county- or city-level overrides. This will be retired alongside the legacy service. 
• Shopify Tax uses your product categories to automatically apply product rate exemptions. Because of that, it’s a good idea to set or double-check your products’ categories as they will begin affecting the rate charged on your orders.
• Be sure that your products are marked as “requires shipping” unless they are digital goods; this will affect their taxation. If you are using this setting to prohibit goods from being shipped, manage sales channels within each product page.
• Update any customized email templates you may have.

Choosing another tax service

If you decide Shopify Tax isn't the right fit for your business, you can downgrade at any time to Basic Tax or Manual Tax in your US tax settings. Remember, Shopify Tax is free on Point of Sale until January 1, 2024 (and always free until you reach $100,000 in US sales each calendar year), so you can test out its benefits until then! We'll also send you a reminder before billing begins to help you make an informed decision.

This table can help you determine which tax service is best for your needs.

	Shopify Tax	Basic Tax	Manual Tax
Sales tax calculation
Automatic rate calculations using tax registrations	✔	✔	✘
Automatic rate calculations using product categories	✔	✘	✘
Automatic recommendations for product category	✔	✘	✘
Rooftop accuracy	✔	✘	✘
Support for state fees	✔	✘	✘
Tax holidays	✔	✘	✘
Markets Pro	✔	✔	✘
Reporting and insights
Tax reports	✔	✔	✔
Tax liability insights	✔	✘	✘
Advanced reports	✔	✘	✘
Exemptions and overrides
B2B tax exemptions	✔	✔	✘
Customer tax exemptions	✔	✔	✘
Manual tax rate overrides	✔	✔	✔
Collecting tax in states with no state sales tax	✘	✘	✔

We're here for you

Visit the Shopify Help Center for more details and guidance on how to make these changes. And be sure to visit your US tax settings on November 13 to find all of the Shopify Tax features available to you. If you need extra assistance, our 24/7 support team is ready and waiting to help.