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Shopify sales tax setup for stress-free compliance | Walk-through guide - YouTube
Channel: LedgerGurus
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Hi, Shopify sellers. This
is Kexin from LedgerGurus.
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And today I'm gonna talk to you about
sales tax settings in your Shopify store.
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I know this is not the
most exciting topic,
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and it's just another admin task
to add to your list. But trust me,
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if you can set this up correctly,
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then you are on a really good path
to be compliant with sales tax,
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and you don't have to pay
much out of your pocket.
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So before we dive into the content,
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if you haven't done so please subscribe
to our channel and hit that bell,
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so when we get new videos
published, you will get notified.
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So at LedgerGurus,
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we help so many e-commerce clients with
their e-commerce accounting and journal
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entries and transaction coding and bank
reconciliations. But at the same time,
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we also have a dedicated
sales tax team that manage
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everything that's relating to
sales tax for these customers.
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So I'm in Shopify all the time,
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and I do these sales tax settings
for my clients day in and day out.
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So this is really my arena to share
my experience with you guys. Please
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comment if you have any questions
and we'll be sure to get back to you
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on those questions. So, today
I'm gonna talk about two things.
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The first is how does sales
tax work with Shopify?
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Who's collecting it?
Is Shopify like Amazon?
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And then the second part is I'm gonna
walk you through the things you need to
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make sure you finish setting up on
your Shopify store to be sales tax
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compliant. So to answer
the first question,
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we get lots of inquiries on
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what's Shopify? How does
Shopify deal with sales tax?
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And the answer is Shopify is not like
Amazon or Etsy or Walmart or another
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marketplace facilitator,
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where you can just hand
over the responsibility to
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them for, to collect and to remit
tax to the different states.
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If you are selling on Shopify,
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every sale that goes through Shopify
is your responsibility to collect
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and remit sales tax. So Shopify's
not gonna do it for you.
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You have to do it yourself.
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Shopify's not gonna turn on those
settings for you automatically.
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You have to turn them on yourself.
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So then let's talk about how
to turn on those settings.
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There are five things that,
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over the years of my struggle with
Shopify, that I've figured out.
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So I hope that this is
really helpful to you guys.
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So,
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the first thing is to enter the places
you want Shopify to collect sales tax in.
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So you would go to settings and you
go to Taxes and then you go to US
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store. And then that's where
you can add all the states.
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If you are one of the older Shopify
users, you need to add a zip code.
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If you are using the new
interface, which I really like,
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then you don't have to enter the zip code.
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You just need to enter your
sales tax license and then the
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state. And, then sometimes it asks
you which way of sourcing you want.
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So we can talk about
sourcing another time.
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So that's the first thing is you need
to tell Shopify where to collect tax.
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The second thing is after step
one, if you go back out of US,
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if you go to settings and then
taxes, if you scroll down,
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so it's below all the different countries,
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you can see a box that says
automatically calculate tax on shipping.
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Some states charge
shipping, some states don't.
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So you would need to check this box, so
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Shopify will calculate tax on shipping.
And then for the states that you
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know, are not taxing shipping,
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you need to go in and add a tax
override for shipping in that
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specific state.
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The third thing is you want to make
sure all your taxable products are
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collecting sales tax. So to do this,
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you need to go to your products
and go to each products. You
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can edit each variant and
then somewhere in the middle,
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there's a box that says
charge tax on this product.
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You want to check that for the
products you that are taxable,
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some products are not
taxable, for example, gift
cards. Those are not taxable.
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So you would not check the
box for those products.
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Then the fourth thing is you want to
add all your locations in from where the
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fulfillments are going through.
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So your warehouses that are
fulfilling these orders that are
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sold through your Shopify store. So
you would go to settings and locations.
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And at all of those...The reason that
this is important for sales tax is because
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some states are origin sourcing.
Some states are destination sourcing.
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So depending on where the
goods are shipped from,
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if it's an intra-state, transaction,
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meaning if it's shipped from the state
to a customer in the same state versus
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shipped from one state to another state,
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the rates are very different and where
to look for those rates are different.
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So it's important to put the
location of your warehouse there.
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And the last thing is exempt
customers. If you sell to
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exempt entities, or if you sell to
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like wholesalers that are gonna
use your products for resale,
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then those are all legitimate reasons
to exempt sales tax for certain
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customers.
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And thus you would go to customers and
you go edit this customer's information
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and you check the box to say,
this is an exempt customer.
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And you can also give a
reason on why this is exempt.
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So to just summarize - five places, first,
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you need to tell Shopify
where to collect sales tax.
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Then you need to configure
shipping options. And then third,
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you need to make sure your products
are all collecting tax for the
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taxable products. And fourth, you need
to add locations of your warehouses.
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And the last thing is to add
information for your exempt customers.
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Let me know if you have any questions,
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feel free to leave comments and
for sure to get back to them.
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If you like this video, please like it.
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Share it with your fellow Shopify users.
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Hope you all have a good day
and I'll see you soon. Bye.
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