Managing US Taxes

This guide is for merchants who sell in the United States. It's your responsibility to consult with local tax authorities or a tax professional to verify that you charge your customers the correct tax rates, and to ensure you file and remit your taxes correctly.

If you need to charge sales tax in one or more US jurisdictions, then you need to contact each of the relevant agencies and register with them. The process varies depending on where your business is based and where you sell, and on the individual government requirements.

On this page

Nexus

Setup Regions in Which You are Registered

Nexus

If there is a nexus, or connection, between your business and a state, then you probably need to charge sales taxes there. A nexus can be physical or economic.

Physical nexus

Traditionally, physical nexus occurs when you have a physical presence in a state, such as a store or warehouse. Some states have a broader definition of nexus, and can include any of the following:

• Solicitation of sales
• Fulfillment services
• Presence of inventory
• Presence of employees

Economic nexus

Economic nexus occurs when you exceed a certain threshold of sales to customers in a specific state.

In June 2018, the Supreme Court of the United States ruled that states can require online sellers to collect sales tax based on the volume or value of transactions into a state, also known as economic nexus.

The sales threshold that determines whether you have nexus is different for each state. If you're not sure whether your sales to customers in another state mean that you have nexus there, then consult with the state's tax authorities or a local tax professional.

Set Up the Regions in Which You are Registered

After you've registered with the tax agencies and have your sales tax ID, you can set up your taxes.

Steps:

1. Go to Settings > Taxes.
2. In the Tax regions section, beside United States, click Edit.
3. In the Tax registrations section, click Add tax registration.
4. Select a state in which you are registered.
5. In Sales tax ID, enter your account number.
6. Optional: Select whether you would like the taxes collected automatically (we regularly update tax rates and in States where taxes vary by address we provide real-time lookups) or manual.
   1. Automatic: We use a tax calculator for States in which rates vary by address to provide real-time rate lookups and in States where tax is constant automatically apply that rate in checkout. We automatically apply tax on shipping where applicable.
   2. Manual: You can plug in a manual rate for that State and decide whether tax is applied on shipping or not.
7. Click Submit.
8. Optional: Add more regions and account numbers by clicking Add tax registration.