Shopify Tax Changes: New Tax Engine Options Available

Shopify recently announced that starting April 30, 2025, it will end its existing agreement and integration with Avalara.

As a result, all Shopify Plus merchants currently using the legacy AvaTax integration will need to choose between two options:

  1. Switch to Shopify Tax
  2. Migrate to the new Avalara for Shopify integration, which is owned and maintained by Avalara.

This decision must be made by April 30, 2025.

If you’re already using Shopify Tax, no action is required. However, if you’re still on the old Avalara integration, you’ll need to decide which path to take before the deadline.

Both Shopify Tax and Avalara for Shopify offer the following features:

  • Rooftop Calculations: Sales tax rates are calculated based on the full address, not just the zip code.
  • Automatic Rate Updates: Tax rates automatically adjust for sales tax holidays and other changes, eliminating the need for manual updates.
  • Sales Tax Analytics: Provides insights into your sales tax obligations, helping you stay compliant.
  • Supports State Fees: Includes the ability to collect state-specific fees, such as the Colorado Retail Delivery fee.

Shopify Tax: Pricing and Features

Pricing
Shopify Tax starts charging fees when your store exceeds $100,000 in global sales. Currently, it’s available in the US, UK, and EU regions.

Once you hit the $100,000 threshold, the following fees apply:

  • 0.25% per order for Shopify Plus subscribers
  • 0.35% per order for non-Shopify Plus subscribers
  • Fees are capped at $0.99 per order
  • Annual cap: Fees max out at $5,000 per region, with a total cap of $15,000 internationally.

Important Details

  • The $100,000 threshold includes all sales channels connected to Shopify (e.g., gift cards, in-person sales, and non-taxable products).
  • Sales through Shopify Payments and other gateways count toward the threshold.
  • Shopify’s tax migration team offers personalized support during the transition.
  • The agreement’s term is still uncertain, but a 12-month commitment is expected.

Avalara for Shopify: Pricing

Avalara’s AvaTax is a well-established tax engine known for its reliability. It is also a fully global solution, unlike Shopify Tax, which is limited to specific regions.

For existing AvaTax users, Avalara is offering a new integration with Shopify, along with promotional pricing.

For new users, pricing depends on your specific sales tax needs, as every business’s tax situation differs. If you’re looking for guidance, reach out to BW Partners, and we’ll help you navigate your sales tax requirements.


Automated Sales Tax Filings: A New Feature in Shopify Tax

Shopify Tax now offers automated sales tax filings, but there are important limitations to keep in mind:

Eligibility Requirements

  • Available only to U.S.-based stores using Shopify Tax.
  • Merchants must use Shopify Payments, Shopify Balance, or Shopify Credit exclusively.
  • Stores that used non-Shopify tax tools in 2024 are not eligible.

Limitations

  • State-level filings only – local jurisdictions (e.g., Colorado, Louisiana) are not supported.
  • Sales from non-Shopify channels, imported orders, and marketplace sales (e.g., Amazon) where Shopify is not the merchant of record are excluded.
  • Compatibility issues exist with certain apps, such as Loop Returns.
  • Current returns only – back filings or amended returns are not supported.
  • Automated filings are not included in Shopify Tax and come with additional fees.

Are Shopify Automated Filings Right for Your Business?

Shopify Tax offers a convenient solution for sales tax compliance, with features like rooftop calculations and automated filings. However, its pricing structure, eligibility requirements, and the limitations of automated filings should be carefully evaluated, especially for businesses with:

  • Complex sales channels
  • Significant sales outside of Shopify

Before deciding, consider your business’s specific needs and determine whether Shopify Tax aligns with them.


Need Help Navigating Shopify Tax Changes?

The Shopify Tax changes will significantly impact Shopify Plus users, and understanding these shifts is crucial. If you’re unsure about which solution best suits your business, our team of ecommerce accounting and sales tax compliance experts is ready to assist.

We specialize in the complexities of US sales tax and can take the pressure off your shoulders, helping you stay compliant while you focus on growing your business.

Contact us today to ensure your business remains compliant and to find the best solution for your needs!

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