How to correctly set tax collection for one state only?

Accounting & Taxes
1

hello,

I only have nexus in the state where I live so I set up my shop to collect taxes there and it says

“You’re collecting sales tax in 1 state in the US.” (ok good)

but I noticed when setting up product pricing there is a box to check that says “Charge tax on this product”

so do I check that or not if I ONLY want taxes to be charged where I have nexus?

thank you!

2

Hey @sugarhai ,

Great question!

If you go into the product and de-select the option to “charge taxes on this product” then no matter the rates/settings you have set up in the Tax section via the admin, no tax will be applied to the product.

If however, you do need to charge tax on products for certain areas, you can leave it checked and go to your Settings > Tax where you have set the rates for different countries/states or create tax overrides and exemptions. When a customer in your state purchases the item, they are charged the tax rate but if someone from another state purchases it, they are not charged taxes.

The tax rates that you charge are affected by whether your state is an origin state or a destination state.

Destination states: In a destination state, the sales tax you charge is based on the address of your customer.

  • If you have no nexus in the state of the shipping address, then no tax is charged.

  • If you have nexus in the state of the shipping address, then the customer’s location is used to determine taxes.

Origin states: In an origin state, the sales tax you charge is based on your location’s nexus.

  • If you have no nexus in the state of the shipping address, then no tax is charged.

  • If you have a physical nexus in the state of the shipping address, then the location of your nexus is used to determine taxes. If you have a nexus but no physical location, then the customer’s location is used to determine taxes.

You can read more about setting up US tax rules below:

Let me know if you have any further questions!

1 Like
3

perfect! thank you, so I will leave the box checked and I’ve got it set up and it says

“You’re collecting sales tax in 1 state in the US.”

so will it just collect for that one state now?

4

@sugarhai

Yes you are correct! As long as you have it set up to do so, only tax will be collected in the designated state(s).

Don’t hesitate to reach out if you have any other questions,

1 Like
5

Dear @Moira Sorry for picking up a solved thread. Can you please let me know how to charge tax only for one specific country. And 0% for the rest of the world? Thank you in advance!

6

Hey @LeonL !

You will need to set up location-based tax rates. Before you set up taxes based on the destination, verify whether you are obligated to charge sales taxes to your customers and whether your product is taxable.

  • From your Shopify admin, go to Settings > Taxes and duties.
  • In the Tax regions section, click the name of the country.
  • In the Base taxes section, enter the rates that apply in the country and any regions. You can choose whether a tax in a region is used instead of a federal tax, is added to a federal tax, or is compounded with a federal tax. If you’re not sure which setting to choose, then contact your tax authority or a local tax expert.
  • Click Save.

For further guidance, check out our help doc on Taxes below:

7

I have followed your suggestions and still having the same issue. I can see the taxes but they are not being transferred to the customer.

8

Hey @Valencia71 ,

Generally, the Shopify tax system will only charge sales tax to US customers in states where you have a presence that is inputted into Shopify’s tax settings.

Have you checked your tax settings if you have any state set to override?

If you do not have a tax nexus in a state, you likely won’t need to collect and pay sales taxes for orders placed from that state. A nexus is usually defined by having employees or locations in a state; we’ve more information on how this is defined here. We also offer a more comprehensive explanation of setting up US taxes on Shopify that you may wish to check out.