Does Shopify File Sales Tax Returns? Here’s What You Need to Know

If you’re selling (or planning to sell) on Shopify, you might assume that sales tax is already handled for you. And, to some extent, that’s true.

Shopify Tax, the platform’s built-in tax compliance tool, can calculate sales tax at checkout and — optionally — file returns on your behalf. But the reality is more complex.

While Shopify does offer automated filing, it only does so under certain conditions and is limited in scope. For example, if you’re selling in SST states or across different channels like Amazon, Etsy, or TikTok, you’ll quickly find that Shopify’s native tools aren’t really built to handle that complexity.

In this guide, we’ll cover what Shopify Tax actually does, where it falls short, and how you can fill in gaps without wasting hours on manual filings or spending thousands of dollars for professional help.

What Shopify Tax can do

Shopify Tax is designed to help merchants stay compliant with U.S. sales tax laws by handling key parts of the compliance process. Mainly, this involves calculating sales tax and submitting filings to tax authorities for sales made through Shopify.

Here’s a brief rundown of what Shopify Tax can do:

• Real-time sales tax calculations at checkout. Like many other tax compliance tools, Shopify Tax uses the buyer’s location and product categories to calculate accurate tax rates across 11,000+ jurisdictions.
• Tax-inclusive pricing. Merchants can choose to display prices that include sales tax (useful in the UK and other countries) or to show tax separately at checkout (common for U.S. pricing).
• Sales and tax liability reporting dashboards. Shopify Tax offers nexus tracking and a dashboard view of all sales and taxes by state, country, and local jurisdictions.
• File tax returns or remit payments. Shopify users can file U.S.-based sales tax returns on behalf of merchants who meet eligibility requirements for the service.

Although Shopify Tax covers the basics for sellers operating within Shopify, it’s not a one-size-fits all solution. The core strength of the service lies in the checkout tax calculation and reporting for Shopify-hosted sales, with optional filing available in select scenarios.

If you’re not sure whether Shopify Tax will work for you, this guide can help you figure out whether the platform is a good fit.

What Shopify Tax doesn’t do

While Shopify Tax offers basic sales tax calculations and filing options for merchants on the platform, its tools are limited.

As a business grows and expands into new states and sales channels, it’s possible that brands will need solutions that offer a more comprehensive approach to tax compliance.

Here’s a closer look at what Shopify Tax doesn’t do:

• Register companies for sales tax collection. Shopify doesn’t handle sales tax registration at all. Merchants must register manually in each state where they have nexus before they can begin collecting and remitting tax. This must be done prior to setting up Shopify Tax calculations.
• Track nexus thresholds across marketplaces. Shopify Tax offers full nexus visibility of all sales transacted through the Shopify store, but it doesn’t fully track nexus obligations across other sales channels or marketplaces. Instead, the platform highlights areas of potential liability and leaves you to determine next steps on your own.
• Support the Streamlined Sales Tax (SST) program. Although Shopify Tax offers filing options, it doesn’t participate in the SST program. Compliance solutions using SST can offer free tax filings in up to 24 states.
• Offer audit support. If you’re audited, Shopify won’t provide help or documentation to defend your filings. You’re on your own when it comes to compiling records and responding to tax authorities.
• Support marketplace or third-party sales. Shopify Tax doesn’t automatically calculate or file tax on orders placed through third-party marketplaces like Amazon, Etsy, Walmart or TikTok, but it can do so on Meta and Shop channels where Shopify is the seller of record.
• Align product categories with other marketplaces. Shopify uses its own system of product categories that might not align directly with how other tools organize the same products. This can create category mismatches that require custom development work or a system like TaxCloud’s TIC Mapping functionality to resolve.

For small merchants selling exclusively through Shopify in one or two states, these gaps might not seem urgent.

Over time, as the business scales and tax complexity grows, the limitations become more challenging. Without the tools to track nexus obligations across multiple sales channels or handle filings at scale, it’s easy for brands to leave themselves exposed to compliance risks and penalties.

Before taking the plunge with Shopify Tax, be sure to review the considerations page carefully.

Why this matters

Sales tax compliance involves more than collecting the right amount at checkout. Companies need to register in the correct states, return filings on time, and stay aware when business activities trigger new compliance obligations. When a tax platform doesn’t handle or monitor those critical pieces, the risk shifts back to you.

Shopify Tax’s marketplace limitations are a good example of this shortfall. Many businesses sell across multiple marketplaces, but Shopify Tax doesn’t track those sales and doesn’t factor them into any of its nexus calculations (just as other brands won’t do it for off-platform sales). Instead, the business is solely responsible for knowing their cumulative earnings and reporting those totals.

Without a solution that can monitor sales across all channels and platforms, it’s easy to underreport earnings, potentially triggering audits or penalties.

Shopify’s native tools are great for handling early-stage and single-marketplace tax needs, but the platform doesn’t scale well as the business grows. Teams often hit a point where they’re spending hours on manual filings, paying high filing costs, second guessing where they have nexus, and struggling to keep up with changing state-by-state rules because Shopify Tax doesn’t handle those challenges.

To offset that, brands will eventually need a dedicated tax solution that can monitor obligations across all online channels where the business sells goods and services.

How to file sales tax returns as a Shopify seller

Shopify merchants have several ways to handle their sales tax filings.

The best method often depends on the number of states and channels the brand is selling into, as well as the time and budget that can be allocated toward compliance.

Shopify native filing

Shopify offers automated sales tax filings for eligible merchants using Shopify Tax. While this is a good contender for businesses that only sell through the Shopify platform, it becomes less viable as soon as companies start selling through other channels.

Cost is another consideration. Shopify charges $75 per return for merchants on Basic, Grow, or Advanced plans while the Plus plan users see that price lowered to $50 per return. These costs are charged per state, per filing, and can add up quickly as your obligations grow.

On top of that, Shopify handles its tax filing processes internally and doesn’t give merchants much control or visibility into how those filings are prepared or submitted. While the system is designed to be fully automated, that lack of flexibility can create challenges for businesses with more complex filing requirements.

DIY

Some merchants choose to manage their sales tax filings manually by logging into state tax portals, calculating their liabilities, and submitting returns directly. While this approach might look like a cost-saving measure at first and can be viable for very small businesses, it’s far too easy for this approach to end up adding time, stress, and risk when compared to automated solutions.

Each state has its own tax rules, deadlines, filing frequencies, and required forms. Keeping track of all sales and tax data across multiple jurisdictions takes time and careful attention to detail. Plus, the consequences of a missed deadline or misreported return can include penalties, interest charges and audits.

In addition to the administrative burden, DIY filers must also stay on top of evolving regulations, nexus laws, and product classifications. That’s a big ask, especially in the early stages of brand growth, where lean teams and solo founders must spend their time and limited resources wisely.

Hire a CPA or accounting firm

Another common approach when filing sales tax through Shopify is to outsource compliance obligations to a CPA or accounting firm. This is a good option for businesses that already have a financial partner handling bookkeeping or income tax and want help managing filings across a few states.

Similar to the DIY approach, the problem with this method ultimately comes down to cost and time investment. Many firms charge a flat rate (often by return or by the state), which means that costs increase quickly as your filing obligations grow. In many cases, you’re still responsible for gathering all of your sales data and passing it to your accountant, especially when selling across multiple platforms.

While CPAs can help teams navigate the complexities of sales tax, nothing about the process is automated. Even though the work is outsourced, teams still need to prepare the data, manage communications, and keep tabs on deadlines. These obligations can even overwhelm smaller CPAs, forcing teams to seek additional partners or upscale to a larger firm, both of which are likely to incur additional costs.

Use a third-party tax automation platform

In most cases, using an automated, third-party tax platform is the most efficient and scalable way to manage sales tax compliance. Solutions like TaxCloud, Avalara, Vertex, and others are built specifically to handle the complexities that come with multi-state and multi-channel sales.

(Watch the full session to see how fast-growing Shopify brands are simplifying sales tax. Ryan Pinkham (VP of GTM) and Tom Hoopes (Director of Filing) share a smarter, more scalable approach to compliance for Shopify merchants. Whether you’re managing filings in-house or struggling with a provider that’s falling short, this session offers a clear blueprint for streamlining your process — without the stress.)

The key difference between these solutions and Shopify Tax is that third-party providers can integrate with multiple sales channels — not just Shopify. This means that the system can connect to multiple e-commerce platforms and marketplaces to provide a holistic view of a brand’s tax obligations.

For instance, a brand selling across three marketplaces will need to gather the data from those marketplaces, consolidate it, and remit taxes based on that information. Even if each sales channel has been collecting the appropriate taxes, companies still need to monitor their nexus obligations, fill out the paperwork, and file everything within the state-determined deadline.

Platforms like TaxCloud automate this process in its entirety when integrated with all sales channels. We focus on sales tax exclusively, and we integrate with a variety of marketplaces in order to bring all of your tax data under one roof. When you’re connected with TaxCloud, all of your sales and tax data flow into the platform, where it’s automatically consolidated based on location.

However, using a third-party provider doesn’t mean abandoning your tax engine entirely. In most cases, external platforms still rely on built-in systems to calculate sales tax. For example, while TaxCloud offers its own tax engine, we recommend Shopify brands use Shopify Tax for calculation. From there, TaxCloud grabs the information via our Shopify integration and adds it to sales data from other channels.

For Shopify users looking to scale without overspending on services and support, third-party automation platforms can provide the flexibility and coverage where native tools and manual processes fall short. Plus — while we can’t speak to other platforms — you can always call or chat with TaxCloud support and get help from a real person who can walk you through any configuration or data issues.

Choosing the right filing solution for your Shopify business

Although similar, sales tax filing solutions vary in terms of scope and scale. Finding the right one depends on your business model, sales volume, where you have nexus, and how many channels you sell through.

While Shopify Tax offers a great starting point for calculating and displaying sales tax at checkout, it isn’t designed to handle tax collection and filing outside of Shopify.

Because of this, many Shopify merchants use the platform as part of a blended or hybrid setup. Shopify Tax calculates the tax on-platform before passing that information over to TaxCloud or a similar solution, where the tax information is consolidated with tax data from other channels. This combination offers the benefits of Shopify’s built-in calculation tools while still offering flexibility and automation as the business scales.

In the section below, we’ll walk through how to evaluate tax tools, what to look for in a filing partner, and when it makes sense to move from manual processes to a fully automated approach.

Evaluate tools based on capabilities

When comparing sales tax platforms, the right tool needs to meet both the current and future needs of the business. Platforms that are too small or limited in scope may not support long-term growth, forcing a switch sooner rather than later.

Here’s what to consider while evaluating different solutions:

• Tax calculation. Teams selling only on Shopify can use Shopify Tax to handle calculation at checkout. However, this begins to break down when business scales to other platforms. A third-party solution can reflect your entire sales footprint, not just what happens on Shopify. When looking at different options, make sure that the platform you want to use supports Shopify and offers calculation options.
• Nexus tracking. Sales tax obligations change as a business grows. Especially for multichannel sellers, single-platform options like Shopify Tax don’t do a great job tracking nexus obligations because they only see transactions completed on a single platform. Third-party solutions with economic nexus tracking will consolidate sales data across all platforms and will alert you when the business crosses nexus thresholds.
• Filing automation. Manual filing works in the earliest stages of the business, but it doesn’t scale. A strong tax solution should be able to generate, submit, and remit returns automatically so that brands can save time while reducing the risk of a missed deadline or a reporting error.
• Support coverage. Any platform you choose needs to integrate with your entire e-commerce stack, not just Shopify. Getting everything up and running can be a challenge, which is where onboarding and support coverage is most helpful. If you have a complex tech stack with a dedicated CRM or ERP set up to assist your e-commerce sales, this type of support can save time when trying to get up and running.

The best tool is one that can help the business both now and into the foreseeable future. A solution that offers accurate calculations, nexus tracking, and automated filing across all sales channels will save time, reduce risk, and scale with your growth.

How you plan to grow is also a major factor. For example, providers that are focused on a specific region, like TaxCloud, are a great fit for partners who are interested in selling at that scale. At the same time, if the brand is on the brink of breaking into international markets, solutions built to handle VAT, GST, and other global configurations will make more sense.

What to look for in a compliance partner

Once you’ve defined what capabilities you need, the next step is to find a partner that fits with the company tech stack and growth trajectory.

A strong compliance partner should integrate seamlessly with Shopify Tax while also providing automation, support, and transparency in how it operates.

• Shopify compatibility. Any solution you choose should integrate well with your existing Shopify store, ideally through a native integration or API. Shopify changed the way that the platform handles tax calculations. Now, most apps (including TaxCloud) let Shopify Tax handle any tax calculations while exporting the data or providing auxiliary support to make calculations more accurate, like adding up-to-date tax codes or syncing product catalogs between systems for better tax code mapping.
• Clear pricing. Some solutions charge a flat monthly rate while others bill per return, per transaction, or per filing. While shopping, be sure to pick a pricing model and contract term that makes the most sense for the brand. Many platforms require an annual commitment, but a few offer pay-as-you go pricing or a blend of both options.
  
• Full automation. Manual tasks won’t scale with tax compliance. There are too many rules and regulations for teams to track and too much paperwork to file. A true compliance partner should automate almost every step of the filing process, including tracking nexus and remitting payments. This approach reduces the potential for human errors and frees up internal resources for other business projects.
• Filing options. Make sure the platform you choose offers filing support in the states where you operate. If possible, save money by going with a platform that participates in the Streamlined Sales Tax program, such as TaxCloud or Avalara. These brands have been designated as Certified Service Providers (CSPs) within the SST program and allow qualifying merchants to file taxes for free in SST states.
• Migration support. Switching from one provider to another isn’t always as simple as clicking a button. Many brands need guidance through the transition. At TaxCloud, our best-practice migration timeline is about four weeks. This includes preserving historical data, coordinating with the legacy provider for final filings, setting up and going live with TaxCloud while turning off old services, and reviewing returns before the first official filing. A structured approach like this minimizes risks and ensures a smooth handoff between systems.
  

Other factors to consider might revolve around headcount, what existing support you already have for this issue (external CPAs, internal compliance teams, etc.). If those elements are present, be sure to take them into consideration when making your selection.

At the end of the day, the right compliance partner should feel like a natural extension of your team rather than just another piece of software.

When to make the switch from manual to automated options

If you’re just starting out, manual tax compliance might be viable during the earliest stage of the business. Teams that only need to submit taxes to one or two states or who aren’t sure if they’ll reach economic thresholds (physical nexus is another matter) will be able to submit manually without major issues.

However, as the business grows, both complexity and risk increase. Dedicating more time and resources can quickly equate to missed opportunities and added risk.

Here are a few signs that it might be time to move to an automated solution.

• You sell beyond your home state. More states means more jurisdictions and more rules. Every state has its own rules (check out our guides here), filing frequencies, and registration requirements. Automation helps reduce the mental overhead while keeping filing and remittance aligned and on schedule.
• You’re considering hiring an individual to help with filing. While hiring a part-time accountant or outsourcing to a CPA can offload some of the mental challenges, it’s a solution that incurs substantial costs. If you’re at this point, it’s a good moment to assess whether automation could deliver the same value with lower overall costs. A well-integrated solution can replace many manual workflows and free up headcount. Many platforms can even work in conjunction with accounting firms and CPAs to further streamline the compliance workload.
• You’ve tripped economic nexus or facilitator laws in more than one state. In many states, the threshold for economic nexus is set at $100,000. Some states also have a (surprisingly low) transaction limit. On top of that, several states also require platforms to collect and remit tax on behalf of a third-party seller. Crossing these thresholds will require registration and regular filings, and handling this across multiple states is a time-consuming process. Automation can offset these responsibilities without adding hours to your monthly workload.
• You’re spending 5-10+ hours per month on tax compliance. If your team is regularly spending full days each month just to handle tax data and submissions, that’s a clear sign that current processes won’t scale in the long term. Compliance platforms can cut down this time significantly while improving accuracy and audit readiness.
• You’ve already lived through an audit. Even for brands with impeccable bookkeeping and records, audits can be a nightmare. Automated compliance platforms help to create consistent records and reduce reporting errors, streamlining this process. Some platforms even offer audit support to assist with audit defense.

If any of these scenarios sound familiar, it’s probably time to move away from manual filings and toward an automated solution. Doing so in the early stages of growth will alleviate any compliance burdens before they become overbearing.

Investing in the right tools early can save hours of work and reduce costly mistakes while enabling the business to expand into new states and sales channels without additional stress.

Questions to ask before choosing a solution

Before committing to a solution, it’s worth asking a few key questions to make sure that a platform aligns with your current and future needs.

Here are a few questions to ask before moving forward. If you don’t have immediate answers, take the time to consider how you currently approach these issues and where your current process is causing headaches.

• Can this tool track economic nexus across multiple states?
• Will the platform handle tax calculations, tax filings, and remittance? If not, what tasks need to be handled manually?
• Can this solution integrate with Shopify and other sales channels that I want to use in the future?
• Are there hidden registration fees, filing fees, or transaction costs? (Double check this, especially for flat-rate services.)
• What support does the platform offer, and is that support available when I need them? Is the support team in the same time zone as me?

Taking the time to ask the right questions up front can help you avoid costly surprises down the line.

For brands who want to continue selling on Shopify, a solution that complements Shopify Tax makes the most sense. However, the compliance platform and marketplace interact with one another in slightly different ways, so looking ahead and assessing future potential integrations before committing is a smart idea.

Best-in-class solution: Shopify Tax + TaxCloud

Shopify Tax is an essential tool for calculating taxes on the Shopify platform, but it isn’t built to handle tax compliance for multi-channel brands. It’s only one part of a very complex solution.

To stay fully compliant and avoid unexpected surprises like audits, fines, and penalties, you’ll need a platform like TaxCloud.

TaxCloud works alongside Shopify Tax to handle filing, remittance, and nexus tracking. While Shopify calculates the tax for each order, TaxCloud pulls the data and adds it to information from other marketplaces, then prepares and files accurate returns automatically.

This approach helps brands get accurate calculations at checkout, automated filing in all 50 states, savings through the SST program, and human-powered, U.S.-based support when you need it.

FAQ

Does Shopify file sales tax returns for me?

Yes, but only in certain situations. Shopify Tax offers optional automated filing for eligible merchants selling through Shopify.

For most plans, the cost is $75 per filing. Shopify Plus users can file for $50 per filing. This is much higher than TaxCloud’s filing costs ($39 per filing), and no SST support is available through Shopify Tax, making it a far better option for brands who want to use Shopify Tax while saving money on filing.

Can I use Shopify alone and still stay compliant?

Technically, yes, if you’re willing to handle filings manually or only sell in a limited number of states. But, as the business grows, relying solely on Shopify’s native tools can lead to blind spots, manual work, or missed filing obligations.

What’s the difference between Shopify Tax and third-party providers like TaxCloud?

Shopify Tax is built into the Shopify platform and handles real-time tax calculations for those orders.

Third party platforms like TaxCloud focus on filing and compliance. TaxCloud integrates with Shopify Tax to collect calculated data, consolidate it with other sales channels, and automate the filing process. The two work together to create a more complete compliance solution.

Is TaxCloud compatible with Shopify?

Yes. TaxCloud integrates directly with Shopify and is listed in the Shopify App Store.

Learn more in our Shopify integration guide.

What is the SST program, and how does it help?

The Streamlined Sales Tax (SST) program allows qualifying merchants to file sales tax returns for free in participating states when they partner with a Certified Service Provider (CSP).

However, CSPs are relatively rare. Currently, only six providers (including TaxCloud) qualify for the program, and you’ll have to work with one of them to receive the discounts and benefits.