Shopify Issue with California Sales Tax Rates

Shopify Discussion
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Topic summary

California sales tax rates increased on April 1st, but Shopify has not updated its system to reflect these changes despite advance notification from the state on March 1st.

Current Status:

  • Shopify is aware and working on the issue, but no ETA has been provided for the fix
  • As of the discussion, the problem remains unresolved despite assurances it would be corrected by a specific Friday

Key Implications:

  • Merchants are collecting incorrect (lower) tax amounts from customers
  • Sellers remain liable for the correct tax amounts when filing reports and making payments
  • This creates a financial gap that merchants must cover

Third-Party Solutions:

  • Avalara offers two integration modes: one that relies on Shopify’s calculations (affected by this issue) and another with live tax calculation that can handle complex scenarios
  • TaxJar may have similar limitations when pulling rates from Shopify
  • Some merchants use specialized accounting teams for accurate multi-state compliance and audit protection

Broader Context:
Shopify has ongoing challenges with sales tax accuracy in complex jurisdictions like Colorado, where rates vary by multiple overlapping tax districts rather than simple zip codes.

Summarized with AI on October 27. AI used: claude-sonnet-4-5-20250929.
1

Hi Folks,

Just a heads up, if you sell in California.

Many California Sales Tax districts increased their rates as of April 1st.

Unfortunately, Shopify has not yet updated these rates. I’m not sure why, as California sent out advance notification on March 1st, but we noticed the rates were incorrect yesterday and notified Shopify.

They are currently working on it, but we do not yet have an ETA as to when the new rates will be implemented.

This has implications for you, if you do a lot of business in California, as you are collecting the wrong amounts, but you will still be liable for the correct amounts when you submit your Sales Tax reports and payments.

I’m not sure if Avalara and Tax Jar have updated their rates, or if they just pull from Shopify, but you may want to check your California rates if you use them.

Cheers, Mary

2 Likes
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Hi Barkk,

You’re welcome! I haven’t received notice yet from Shopify that this has been fixed, but I will post it here whenever I do.

We looked at Avalara and TaxJar a couple of years ago, and at that time they seemed to be basing their calculations on whatever they were pulling from Shopify. Shopify has consistently had issues in calculating state sales tax rates correctly, Colorado is a good example, but there are others also. Colorado is a complicated state for sales tax, with multiple jurisdictional taxes that sometimes cross zip codes. Shopify calculates based upon zip code, so until they fix that, their calculations are always going to be inaccurate. When we dug into Avalara and TaxJar, at that time, we found they were pulling those same rates. Perhaps they have all updated their calculations since then.

We found a small accounting team that keeps us in compliance across states, pulls our sales tax reports manually, calculates our rates, submits them for us, and stands by their calculations, thereby protecting us from a tax audit. Avalara and TaxJar do not do that, and I don’t believe Shopify does either.

Cheers, Mary

3

It’s CRAZY that it still hasn’t been corrected. I tried to reach out on the 1st and shopify chat was down. On the 2nd they assured me it would be fixed by Friday, It has not been corrected STILL! I just wasted 45 minutes with a chat advisor who said the same thing, they’re working on it. My neighbor wasn’t aware of the change and lost all of that additional money. Shame on Shopify!!!

1 Like
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Avalara has 2 ways to interact with Shopify - 1) where Shopify does the tax calculation and all Avalara does is receive the information and uses it for tax filings (i’m guessing this is what you experienced before) and 2) - where Avalara does the live tax calculation.

For scenarios like Colorado, the Avalara live tax calculation can handle that, but as you’ve experienced, the Shopify tax stuff isn’t necessarily designed for enterprise nationwide tax compliance. It’s good for many business, but not meant to be a tax fix all for everyone.