Having and managing a Shopify online store is not as easy as it might seem. If you have one, you probably charge shipping to your customers regularly. But have you ever thought of sales tax? Sales tax varies on the country you are shipping to, so you have to be careful about that if you do not want to lose some extra money. Instead of losing your money and having headaches due to sales tax, sit down and find out how to handle it properly.
What is sales tax?
Since sales tax is an extremely confusing and problematic issue, we will start from the beginning to make sure you have got it all correctly. Sales tax is a certain percentage of every sale you make which must be paid to the government of a certain country. There are some countries that made shipping charges taxable, while others didn’t. This is why it is important to check this stuff not to break any tax regulations or laws.
When you own a Shopify store and sell goods there, you should pay attention that you are following all the tax regulations of a certain country you are making shipping to. However, if you do not take the tax laws into consideration, the governing body of that country will still require this specific amount of money, so you will have to give it from your own pocket. On the other hand, you cannot charge sales tax for countries that do not consider shipping taxable because your customers will not be happy with it.
You can find salvation in the fact that you are able to set up your Shopify store to handle all the tax calculations by automatism, so you will not have to think about it every single time.
Of course, you should know that Shopify does not respond to filing the sales tax, so you will have to register your company and let your federal tax authority takes care of your sales tax. Shopify can only help you with all the boring calculations to let you know how you stand with the taxes.
How to charge sales tax?
So, since we have concluded that the most suitable and the most profitable way for you to handle the sales tax is to charge it together with shipping, we should show you how to do it.
To start with, you should let Shopify know where to collect the sales tax from your customers. You can do that by going to Settings and choosing Taxes. Under Taxes, you will have a Tax Region section, where you will be able to choose the region. Next to it, you can click on Set Up and then you will see in which state the sales tax will be collected. By clicking on Collect sales tax, you can set it all up.
The next step is setting up your sales tax calculations. After filling in the necessary information, you can choose from four different options regarding tax calculations. These categories include:
- All prices include tax
- Include or exclude tax based on your customer’s country
- Charge tax on shipping rates
- Charge VAT on digital goods
You can also create a tax override if some of the items you are selling do not fit into the box and are exempt from tax. Now you can save all the changes and stop worrying about the sales tax.
Handling sales tax can be confusing and stressful, especially because your money and profit can depend on it. By following tax regulations of certain countries and setting up your Shopify store to charge sales tax, you will be absolutely carefree.