How should I set up taxes for my dropshipping clothing store?

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I am starting my own clothing store on Shopify but am becoming very discouraged due to not understanding the taxes I need to pay. I will use a wholesaler out of California who will hold my inventory and send it to my customers. I live in Wisconsin. Do I set my location on Shopify as California or Wisconsin? How would I accurately set up my taxes on Shopify? Do I choose "Include Tax In Prices"?


Thank you!

Replies 2 (2)

Shopify Partner
178 11 26


Let us start first with where you want to sell to , is it gonns be only USA or also EU/UK / Australia/ other countries? Taxation rules depends modtly on the destinations you wnat to sell to and the rules are very different. - the best EU and UK VAT compliance solution.

Shopify Staff
1106 118 141

Hi, @beaugro4!


Thank you for your post. I'm unable to provide tax advice, and you will need to consult a tax professional to discuss your tax obligations, but I'm happy to share some resources with you. 


In this help document there is a Dropshipping section which discusses tax liabilities. If your store uses dropshipping to provide products to your customers, then essentially you are buying a product from another vendor, and then your customers buy that product from you. Whether you charge tax depends on the location of your customer and where you and your dropshipping vendor have nexus. Definitely check out that help document to learn more!


You also have the option to hire a Shopify Expert who specializes in U.S. sales tax. They'll be able to review your business and determine your specific tax obligations. Shopify experts are highly-skilled designers, developers, and consultants who specialize in building successful brands, businesses, and Shopify stores. Each expert is reviewed before joining the marketplace, so you know you can trust them to get the job done. You can learn more and browse the available experts here!


In terms of which location to add to your account, that will depend on where your items will be shipping from. You can add your vendor's location as one of the locations included in your plan (more information and steps can be found in this help document). You'll then want to ensure that your inventory is stocked at the right location, and you can learn more about how to do that here. If you're using a dropshipping app, it's possible that a location will automatically be created for that vendor (you can contact the app developer for more information if this is the case).


Whether or not you include the taxes in your product prices will depend on where you'll be selling to. For example, in some countries, such as the United Kingdom, you need to include sales tax in the displayed prices for most types of merchandise. You can find more information in this help document. If you sell internationally, then you can include or exclude taxes in your product prices based on your customer's location within your tax settings. Make sure to check out the considerations for enabling this setting here!


I hope this is helpful, please let me know if you have any more questions. 

Greta | Shopify 
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