The U.S. Sales Tax Guide

Opportunities: U.S. Market

In the past, international trade is dominated by big corporations. The emergency of eCommerce has fundamentally changed that. Many eCommerce companies have now leveraged the US market to expand rapidly and become a global market market leader. Interestingly, Shopify is itself a shining example of this trend. Being a Canadian company, 50% of Shopify’s clients are operated in the US; the domestic market is only ranked #4 and makes up only 6% of its total client base (source: DemandSage). Imagine what Shopify would have been if it had missed the US market!

Challenge: U.S. Sales Tax Compliance

However, selling goods in the U.S. has its own challenges. The complicated sales/use tax system in the U.S. is one of them. This is especially true if your store sells physical goods directly to the consumers.

Here in Canada, we only have federal and, sometimes, provincial sales taxes. In the U.S., the sales tax is administrated at the state level but local governments can add extra surtaxes on it. As a result, you can be filing thousands of mini sales tax returns within just a state return. For example, to file a sales tax return to state of Illinois, you have to allocate your revenue into 1,545 geographic areas, then calculate the tax owing for each one of them. No kidding!!

Luckily, Shopify Tax can calculate sales tax rates for you for a small cut of your revenue. It also collects the taxes from the consumers, assuming you have set up the Tax section correctly. However, filing the sales tax returns to different states and remitting them still remains your responsibility.

Here Comes the Rescue: Automation

Ideally, your tax filing should be automated. Your should have a Shopify app which feeds your daily transactions to the tax software. The tax software compiles your sales tax returns in each reporting period (usually monthly) for your review. Once approved, the tax software files your tax returns, withdraw money from your bank account and remit it to different states.

We can help your setting up the system. Once up and running, the recurring monthly fee for the software is usually between 500-1,000 USD, depending on the number of state returns. If your transaction volume is still low and you prefer manual filings, we also provide that service. Feel free to go over the information on this website. If you decide to request help, reach out to us by our email