It seems when someone makes a purchase from my online store within my state it charges tax. However it is not calculating sales tax from other states. How do I fix this issue?
You only collect sales tax from other states once you've met their individual sales tax nexus thresholds.
Once you meet this requirement, you MUST obtain a sales tax license for that state first, then go into Shopify and turn on sales tax collection for that individual state.
Next you will report/remit as required by the sales tax license instructions. Remember collecting sales tax in any state without a license in hand is illegal in all states.
Thanks for getting in touch. @eCommAccountant has provided a correct summary above, and they are correct in stating that you most likely will not need to collect sales tax in other states unless you are deemed to have a tax nexus in those states.
A tax nexus can be defined through physical circumstances, such as having a warehouse, office, or employees in a state. It can also be determined by economic factors such as making a certain amount of sales to customers in a given state, or by generating revenue from sales into a state that exceeds a threshold. For example, in Colorado, a business is deemed to have an economic nexus in the state if their gross revenue exceeds $100k p/a from sales made from customers in Colorado, or if 200 or more transactions are made in a year.
I would highly recommend checking out our blog post titled Online Sales Tax: A Guide to Economic Nexus & Ecommerce, as this explains economic nexus laws in more detail and provides a state-by-state breakdown of nexus laws.
If you are deemed to have a tax nexus in another state, then you must register for sales tax with that state's tax authority so you can begin to collect and remit sales tax for the orders you're receiving from that state. Please bear in mind that it is always advisable to speak directly to a tax professional if you are unsure of your obligations.
I hope that has helped explain things but please let me know if there's anything else I can help with.