Product Update: Tax Calculations by Zip Code

Product Update: Tax Calculations by Zip Code

Today we're excited to announce a new feature that's been in the works for some time now. Introducing automatic tax calculations by zip code! This new feature for shops in the United States will automatically apply the correct tax rates based on the purchaser's zip code. 

Product Update: Tax Calculations by Zip Code

The US has 50 states all with different tax rates. Kind of annoying. Within each of those states, there are counties with different tax rates, and cities with their own tax rates. The tax rates often vary between counties, cities, and sometimes even between neighbouring zip codes. Yikes! 
So in order to simplify the whole process, we've gone ahead and outfitted the Shopify system with a tax database from the professionals at Tax Data Systems, who do this sort of thing for a living. As a Shopify store owner, you now have the ability to enable automatic tax-rate lookups for any state.

Great! I want it!
If you're brand-new to Shopify, it's already enabled in your shop. If you're an existing Shopify merchant, you'll have to enable it manually, but don't worry, it's super easy. Watch this quick video that explains exactly how to set it up:

If you have trouble viewing this video please click here

Q & A

What states do I need to charge tax for?

The federal requirement is that you charge taxes in any state you have a physical presence. Please consult a tax professional for any further information on whether or not you need to charge sales tax in a specific state.

Is shipping taxed?

This depends on what state the purchaser is in, and is part of our tax database.  In the future this may also depend on whether or not you include handling or padding in your shipping costs, but at the time of writing this does not currently affect it.

Can I change whether or not shipping is taxed?

No. Whether or not to tax shipping is part of the tax law.

Can I change the tax rate?

No. We are using an accurate database that is frequently updated and contains the correct tax rates. It would be unwise to change that. If you have a concern that there is a mistake in our system, feel free to contact us and we will help you get to the bottom of it.

 

Topics:

15 comments

  • Conrad Decker
    Conrad Decker
    November 15 2011, 09:53AM

    You guys are amazing. I believe this is often overlooked by many shop owners when building out their e-commerce sites…I know it’s something that constantly comes up with the shops that we develop.

    This is such an awesome feature, and having it work out of the box is just another way that you’re separating Shopify from all the other e-commerce systems out there.

    Thanks, keep being awesome!

  • JG
    JG
    November 20 2011, 11:38AM

    Next up: shipping calculation by zip code? We use Shopify to sell floral arrangements and plants online, but we only deliver within a specific area near our shop. It would be awesome if we could upload a list of zip codes and prices, and the correct shipping rate would be automatically applied in the checkout. Keeping my fingers crossed for this! Thank you for all your hard work.

  • Matt Walston
    Matt Walston
    November 21 2011, 08:35AM

    Thanks for this feature. This was something I’ve been missing. Good job on continuing to improve and widen the gap from your competition.

  • Sam
    Sam
    November 26 2011, 11:58PM

    Is the rest of the world being integrated?

  • Monty
    Monty
    December 06 2011, 05:31PM

    This is great news. We sell satellite equipment for radio & TV stations, for years we have had to charge tax based on the zip code, however the online story wouldn’t drill it down to the zip code. We are very glad this is in place now.

  • jonathan
    jonathan
    December 15 2011, 02:42PM

    What about zip code and product type? sometimes certain types of products (such as food) are not taxed while others are.

  • Steven Soroka
    Steven Soroka
    February 22 2012, 03:48PM

    @sam Canada next. Any specific request?

    @jonathan: coming up!

  • violet
    violet
    March 05 2012, 07:10PM

    Great idea except…if you use carrier shipping rates and add any padding to the quote even with “charge sales tax on shipping” selected the shipping is NOT taxed. reported to Shopify, but unclear when/if a fix is coming.
    Also, does not correctly calculate California sales tax. Charges everyone in California the rate based on seller’s zip code which is incorrect, sales tax depends on the BUYER’S location within the state and whether or not they are in the same district as the seller. Reported this to Shopify but getting differing responses from support. One told me it’s a bug, another said it’s not and there’s no plans to fix/change.

  • Steve
    Steve
    July 23 2012, 02:03PM

    Any way to switch it back to my city’s rate for any state purchases? Now I don’t know how to complete my report to the State Board of Equalization.

  • Jackie Nooner
    Jackie Nooner
    May 02 2013, 01:02AM

    Not calculating California County tax rates as I use dummy transactions. I’ve enabled everything as instructed in the video. Any suggestions before I pull the plug on this? (I haven’t the desire nor the fortitude the to fight the state of California BOE over a bug in the Shopify system.) Thank you!!

  • Abigail Kempf
    Abigail Kempf
    October 02 2013, 04:01PM

    Will we receive notification of our total tax liability at the end of each calendar year or is there some place on the site that calculates our on going tax liability?

    thanks

  • Teena Davidson
    Teena Davidson
    April 21 2014, 11:54AM

    So I have done quite a bit of reading on the tax laws. I just want to make sure I understand what I am reading. If I have a physical presence in Georgia and I also have an ecommerce website, I tax only the customers I sell to in Georgia. Also I will have (not live yet) two pricing models, wholesale and retail. My wholesale customer in GA will have a tax exempt number. How do I handle that order?

    Also do any of you guys used NetParcel for real time shipping. We manufacture upholstered furniture. I have found out they have an interface with NetParcel. I have had many conversations with Netparcel and they seem to be extremely helpful. I am new to all of this. Thanks Teena

  • Matt
    Matt
    May 29 2014, 04:23PM

    Is there a new feature as of 1/1/2014 that will compute sales for every county US nationwide in order to comply with new sales and use tax law?

  • norm vinson
    norm vinson
    September 19 2014, 12:05PM

    Wow that’s great. What about canada (BC, manitoba, and quebec have their own state-like nexus rules), europe and OZ?

  • Anne Dimond
    Anne Dimond
    October 21 2014, 02:15PM

    My book keeper takes hours to format the orders export to ensure we have all data (including customer name, ship to and products ordered) in the format that is managable. I wish that the order export report would duplicate all customer data for each product ordered, so she can sort the reports on the sales tax (and other fed/state taxes).
    I just upgraded to professional plan to do my own reports but it really is not helping at all (can’t put customer name, shipping address/zip, order# et).
    The simplest solution: if the Sales Tax export report would add customer name, order#, ship to address/zip.

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