Shopify Tax Explained: Pricing, Sales Tax Nexus and VAT in 2026

Shopify Tax is Shopify's built-in engine for calculating sales tax, VAT and GST. It works out the right rate for each order from the customer's address and the product's category, then collects that tax at checkout. Shopify Tax covers sales to the United States, the European Union, the United Kingdom and, since the Spring '26 Edition, Canada.

It's free until your store reaches a sales threshold, usually $100,000. After that you pay a small fee on each order where tax is calculated. One change catches many store owners out: for stores created on or after 13 May 2026, that $100,000 is a lifetime threshold, not an annual one. Older articles that say "free for your first $100k each year" only describe stores created before that date.

This guide explains how Shopify Tax works as of October 2026, what it costs, the basics of US sales tax nexus, a short VAT and GST overview, and where Shopify's responsibility ends and yours begins.

This article is general information, not legal or tax advice. Tax rules change and depend on your circumstances, so confirm your obligations with your state or national tax authority or a qualified tax professional.

How Shopify Tax works

Shopify Tax runs inside your checkout. When a customer enters an address, Shopify works out the tax due for that location and the products in the cart. In the US, Shopify describes this as "rooftop accuracy": rates are calculated from the full street address rather than just the ZIP code, and Shopify Tax also supports state fees and sales tax holidays. Three settings decide whether it gets the answer right:

• Where you collect. You turn on tax collection for each state, province or country where you're registered. Shopify only collects tax in places you've turned on.
• Product categories. Shopify Tax uses the product category on each product to apply exemptions and reduced rates. Clothing, food and digital goods are common examples. A product with the wrong category can be taxed at the wrong rate.
• Your origin and locations. Your business and inventory locations affect which rules apply, especially in US states that use origin-based sourcing.

Shopify's Help Center is direct about who is responsible: "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." Shopify also notes that it "doesn't remit or file your taxes for you, unless you use Shopify Tax and set up automated filing."

If you don't use Shopify Tax, you can set tax rates manually in Shopify's manual tax settings. That makes sense for stores that sell in only a few simple jurisdictions, or that use a separate tax app.

Shopify Tax pricing in 2026

Pricing depends on when your store was created. The figures below come from Shopify's Shopify Tax pricing page, as of October 2026, for stores with less than $25,000,000 in sales. Larger stores should contact their Customer Success Manager for pricing.

A few details matter when you estimate cost:

• What counts toward the threshold: online store sales to any country, sales from connected channels such as Facebook and Instagram, POS sales, Shop sales, gift card sales, sales of non-taxable products, and sales through every payment gateway.
• Where the fee applies: only to orders from regions where you have turned on tax collection, including orders in those regions where no tax is charged because of a product exemption.
• Who pays: you do. The fee appears on your Shopify invoice, not on your customer's receipt.
• Multiple stores: each store has its own threshold.

A worked example: a US store on Grow, created in June 2026, passes $100,000 in lifetime sales. Its next taxed US order of $80 costs 0.35% × $80 = $0.28 in Shopify Tax fees. An order of $400 would work out to $1.40, so the $0.99 cap applies. For a full picture of what a store costs to run, see our guides to Shopify pricing plans and Shopify transaction fees.

US sales tax and nexus basics

In the US, sales tax is set by states and, in many states, by cities, counties and special districts as well. You generally have to collect a state's sales tax once you have nexus there, meaning a connection strong enough for the state to require you to register and collect.

Physical nexus

Physical nexus usually comes from having a presence in a state. Examples include an office, employees, a warehouse or inventory stored there. Inventory held by a third-party warehouse or fulfillment provider can create nexus in some states, which matters if you use a 3PL with multiple warehouses.

Economic nexus

Since the US Supreme Court's decision in South Dakota v. Wayfair, Inc. (decided 21 June 2018), states can require out-of-state sellers to collect sales tax based on sales volume alone. The South Dakota law in that case covered sellers that delivered more than $100,000 of goods or services into the state, or made 200 or more separate transactions there, each year. Each state now sets its own threshold and rules, and some have changed theirs since 2018. Check each state's revenue department for current figures rather than relying on a single number.

Marketplaces and channels

When you sell through a marketplace that acts as a marketplace facilitator, the marketplace often collects and remits the tax on those sales. How those sales count toward your own thresholds varies by state. Keep channel sales separate in your records so your tax adviser can tell them apart.

What to do in practice

1. List where you have physical presence, including any 3PL warehouses.
2. Review your sales by state against each state's economic nexus rules. Shopify's tax reports and its US tax liability insights can help you spot where you're approaching thresholds.
3. Register with each state where you have nexus before you start collecting. Collecting tax without a permit can itself be a problem.
4. Turn on collection for that state in Shopify and add your registration details.
5. File and remit on the schedule each state assigns you.

VAT and GST overview

Outside the US, most countries use a value-added tax (VAT) or goods and services tax (GST). These taxes are usually included in the displayed price for consumers. Shopify Tax supports:

• European Union: Shopify Tax calculates rates using product categories, applies proportional VAT to shipping, and generates VAT invoices. Shopify also offers VAT number validation in checkout for business customers. For low-value goods imported into the EU, the Import One-Stop Shop (IOSS) scheme covers consignments of up to €150.
• United Kingdom: the same VAT features apply, including category-based rates and VAT invoices.
• Canada: Shopify Tax became available in Canada with the Spring '26 Edition. Shopify lists rate calculations based on product categories, advanced tax reports and tax liability insights for Canadian sales.

Cross-border selling also brings duties, import taxes and the question of who acts as importer. If you'd rather not handle these yourself, Shopify's Managed Markets uses Global-e as merchant of record for a per-order fee (3.5% on Basic, Grow and Advanced, or 3.25% on Plus, plus payment and conversion fees). Our guide to Shopify Markets covers how international selling is set up.

Reporting and filing

Shopify gives you tax reports in the Analytics section of the admin. They break down taxes collected by jurisdiction and period, and you can export them for your accountant or filing software. Use them to:

• Reconcile tax collected in Shopify against the returns you file.
• Keep an eye on where your sales are building toward nexus thresholds.
• Check refunds, since refunded tax reduces what you owe.

Shopify did offer automated filing, which filed US sales tax returns for you. As of October 2026, Shopify's Help Center says "Automated filing is closed to new enrollment." Stores already enrolled pay $75 per return on Basic, Grow and Advanced and $50 per return on Plus. New stores need another way to file: doing it themselves, using a filing service, or hiring an accountant.

B2B, exemptions and special cases

Some sales aren't taxable, or are taxed differently:

• Tax-exempt customers. You can mark customers, or B2B company locations, as tax exempt. Keep their exemption certificates on file, because you'll need them in an audit.
• B2B. Since 2 April 2026, native B2B selling is available on Basic, Grow and Advanced, not just Plus. Wholesale orders often involve resale certificates. See our Shopify B2B guide.
• Product exemptions. Some states tax groceries, clothing or digital products at reduced rates or not at all. Accurate product categories are what make these exemptions apply correctly.
• Shipping charges. States differ on whether shipping is taxable. Shopify Tax applies the rule for each state, but only if your shipping charges are set up correctly.

Common Shopify Tax mistakes

• Assuming the free threshold resets each year. For stores created on or after 13 May 2026, it doesn't.
• Collecting before registering. Turn on collection in a state only after you have a permit there.
• Ignoring product categories. An uncategorized product may not get the exemption it qualifies for.
• Treating collection as compliance. Collecting tax is half the job. Filing and paying it is still up to you.
• Forgetting 3PL locations when you assess physical nexus.

For a wider view of compliance issues as you grow, see our article on ecommerce legal considerations before scaling, or browse the Shopify hub for related guides.

Conclusion

Shopify Tax is a solid default for calculating and collecting tax in the US, EU, UK and Canada, and it's free until a store reaches $100,000 in sales. The two things to get right in 2026 are the threshold rule for your store's creation date and the line between collecting tax (Shopify) and registering, filing and paying (you). Pair the tool with a clear nexus review and a filing process, and get professional advice for anything unusual.

Frequently asked questions