Understanding tax nexus: Do I charge for each state?

Understanding tax nexus: Do I charge for each state?

New Member
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Hi, I’m really confused about tax Nexus. I’m selling my product in the U.S. and I’m currently only charging taxes for the state that my business is located in. I’m confused to the fact if I need to add a tax rate for every state or not. In addition I have another completely different business that is set up for drop shipping and I’m not sure how I should have the taxes set for it either. I want to make sure I’m doing this right. Thanks in advance

Reply 1 (1)

Shopify Staff
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Hi @walshhog,


Thank you for your message, and I understand that the concept of a tax nexus can be confusing at first! I'd recommend reading our documentation on what a tax nexus is to get a better understanding. Generally, a nexus is defined by either physical or economic factors, such as having employees or a location in a state or by making a certain amount of sales into a state. 


You'll almost certainly have a sales tax nexus in the state you yourself are based in, so you should register for sales tax in that state and charge sales tax on orders to customers in your store. For other states, if you don't have a tax nexus there, you likely won't need to register for and remit sales taxes in those states and won't need to set up rates within Shopify.


Please bear in mind this is general advice and we would always recommend speaking to a tax professional if you are unsure of your liabilities.

Victor | Social Care @ Shopify 
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