Why are some customers not being charged tax on my online store?

Accounting & Taxes

Topic summary

Store owners are confused about Shopify’s default tax collection behavior, which only charges sales tax to customers within the merchant’s home state. Many merchants mistakenly believe they need to charge tax on all orders and are concerned about paying uncollected taxes.

Key clarification from tax professional:

  • Merchants should only collect sales tax in states where they have physical presence (nexus) or meet economic nexus thresholds
  • Most states use $100,000 in sales OR 200 transactions as thresholds
  • Charging tax without proper state registration is illegal (“collecting not remitting”)
  • Origin-based states like Texas still only tax in-state sales at the origin rate

Common issues reported:

  • Tax only charging for home state customers (working as intended for most cases)
  • Confusion about whether to manually add tax rates for all states (generally not recommended)
  • Some reports of tax calculation errors after platform updates
  • Difficulty getting clear guidance from Shopify support

Recommended actions:

  • Consult local tax professionals to determine actual obligations
  • Only enable tax collection in states where legally required to register
  • Use tax overrides cautiously and only when necessary
  • Verify economic nexus status in other states before expanding collection
Summarized with AI on October 28. AI used: claude-sonnet-4-5-20250929.
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I am in Missouri and this tax thing has fought me every step of the way regarding setup. I work from home and all sales are online. If I am understanding correctly, I will only charge sales tax to Missouri customers. All customers from states other than Missouri will not be charged sales tax nor will I include their sales on my Missouri Sales Tax form that I submit and pay. Am I correct in my understanding? Also - Shopify is automatically charging city sales tax, however, I do not have to collect for my city as my physical residence/business is not in the city/unincorporated land. How can I not have the city tax in there? Thanks for any insight!

Rossann