Some Sales Tax Questions

Accounting & Taxes

Topic summary

A merchant is transitioning to Shopify after avoiding it due to concerns about manual sales tax collection, unlike platforms like eBay or Etsy that handle this automatically.

Main Questions:

  • When to enable “Charge tax on this product” checkbox
  • What happens to collected tax without nexus
  • Whether to charge tax on shipping costs

The merchant operates from a no-sales-tax state and is far from reaching nexus thresholds in any state.

Key Clarification Provided:

  • The “Charge tax on this product” checkbox simply marks products as tax-eligible—it doesn’t trigger actual collection
  • Tax is only collected when both the product checkbox is enabled AND a tax registration exists in Sales Tax Settings
  • Without state registration, no tax will be charged to customers
  • Shipping tax requirements are state-specific and only apply where nexus exists

The merchant can safely enable the product-level setting without concern, as Shopify won’t collect tax until formal state registrations are added.

Summarized with AI on October 25. AI used: claude-sonnet-4-5-20250929.
1

Really struggling to get any info or advice on this. Hoping to get a response here. Would really appreciate it!

I’ve avoided Shopify for years since they don’t collect and remit sales tax like eBay or Etsy, but it’s time to bite the bullet and I want to fully understand state sales tax.

I understand that sales tax needs to be submitted to individual states once you reach that state’s Nexus requirements.

What I don’t understand is when to check “Charge tax on this product”. Shopify support seems to not know anything about this, which is a bit concerning.

I’ve been told by others that I should check the box no matter what, even if I do not have Nexus, just in case I reach Nexus in the future. (I am VERY far away from reaching the Nexus requirements for any state and my business is based in a state that does not have sales tax)

If I do check that box but do not have Nexus/will not be submitting sales tax, where does the tax that Shopify collect go? I’m just confused.

And a followup question, should I also be charging sales tax on shipping cost if I should be checking the “Charge tax on this product”?

Thanks for any advice! I just want to be able to make my store live without being scared I’m doing something wrong with sales tax haha

2

This is a common point of confusion with Shopify. Let’s make this simple!

First of all, Shopify will only actually collect tax where you’ve set up a tax registration. You can consider the “Charge tax on this product” checkbox as just an on/off switch for the product itself. It tells Shopify, “This product is eligible to be taxed,” and nothing more.

The real control is in your Sales Tax Settings. This is where you add states where you have nexus acting as the main hub for tax collection.

Now, Shopify will only collect tax if both of these are turned on for a customer’s order.

In your case, you don’t need to stress about taxes being added until you’ve registered in a state. Once you register, Shopify takes care of applying the proper tax rules on its own.

As for shipping, that’s state-specific; some charge sales tax on shipping fees, some don’t. So, you only need to check “Charge tax on shipping” if you have nexus and the state’s rules say so.