When to check the "Charge tax on this product" box on products?

Accounting & Taxes

Topic summary

A merchant is transitioning from platforms like eBay/Etsy (which handle tax collection automatically) to Shopify and needs clarification on sales tax configuration.

Main Questions:

  • When to enable the “Charge tax on this product” checkbox in Shopify
  • What happens to collected tax if nexus hasn’t been established
  • Whether to charge tax on shipping costs

Current Situation:

  • Merchant is far from reaching nexus thresholds in any state
  • Based in a state without sales tax
  • Received conflicting advice to enable tax collection preemptively “just in case” of future nexus

Key Concern:
Unclear where collected taxes go if the merchant isn’t registered to remit them to states. Shopify support reportedly couldn’t provide clear guidance on this configuration.

The discussion remains unresolved with no responses yet addressing the merchant’s questions about proper tax setup and compliance.

Summarized with AI on October 26. AI used: claude-sonnet-4-5-20250929.
1

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

Does anybody have any advice? Thanks