Handling Shopify sales tax can be tricky, especially with constantly changing tax laws. Whether you’re a small Shopify store or a large Shopify Plus merchant, using a reliable tax app is essential for ensuring compliance. In this guide, we’ll explore the best Shopify tax apps in 2024 that help you automate sales tax calculations, generate accurate sales tax reports, and file tax returns on time.
Shopify’s market share globally is 10.32%, ranking it as the third largest eCommerce platform after WooCommerce and Wix. (source)
Why Use a Shopify Tax App?
Managing taxes manually for a Shopify store can be time-consuming and prone to errors. A Shopify tax app simplifies this by automating sales tax calculations, generating accurate tax reports, and ensuring tax compliance across various regions.
Automated Tax Filing and Compliance
Sales tax automation ensures you meet filing deadlines and handle tax returns accurately. Apps like TaxJar and Sidr Tax help Shopify merchants automatically file sales tax returns to the appropriate authorities without manual intervention. This ensures that you’re always compliant with evolving tax laws and reduces the chances of errors
Accurate Sales Tax Reports
Shopify tax apps generate sales tax reports tailored to different jurisdictions. For example, apps like Tax Rex and TaxJar provide state-specific reports and track your nexus obligations. This helps you understand how much sales tax has been collected and where it needs to be remitted Accurate reporting helps businesses streamline their financial processes and meet their tax obligations efficiently.
Simplified VAT Compliance
For international sellers, VAT regulations can be complex. Apps like Quaderno and Exemptify automate VAT filings and ensure compliance with local regulations, making it easier for Shopify merchants to manage international taxes. This helps avoid penalties related to underpayment or incorrect VAT filings
Nexus Tracking and Alerts
Many apps offer nexus tracking, which alerts you when your store hits a new tax obligation threshold in a particular state. This is critical for U.S. stores as nexus laws differ by state. Apps like Sidr Tax and TaxJar provide real-time tracking to ensure you’re compliant with state sales tax laws
Multi-Currency and Global Compliance
For stores selling internationally, apps like Avalara and Quaderno handle multiple currencies and provide automated tax solutions for global markets. This ensures that businesses remain compliant with varying tax jurisdictions while operating in multiple regions(
In short, using a Shopify tax app simplifies your entire tax management process by automating tax calculations, ensuring timely filings, and keeping your business compliant with local and international tax laws.
Read More:Top 7 Best Shopify Apps for Legal Compliance
9 Best Shopify Taxes Apps
1. TaxJar: Best for U.S. Sales Tax Automation
- Rating: 4.8/5
- Key Features: TaxJar Sales Tax Automation offers automated sales tax reports, nexus tracking, and sales tax returns filing. This app helps store owners collect and remit state sales tax accurately across multiple jurisdictions.
- Best For: Shopify stores selling in the U.S.
- Price: From $19/month.
- Pros: Simplifies US sales tax reports and automates sales tax filings.
- Cons: U.S.-focused only.
2. Sidr: Best for U.S. Sales Tax Automation
- Rating: 5/5
- Key Features: Sidr automates sales tax reports, nexus tracking, and sales tax filing for U.S. stores. It simplifies the process by auto-filing taxes and handling all state-level tax returns.
- Best For: U.S.-based Shopify stores.
- Price: From $19/month.
- Pros: Comprehensive sales tax automation, accurate tax reports.
- Cons: U.S.-only.
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3. Quaderno: Best for International VAT Compliance
- Rating: 4.7/5
- Key Features: Quaderno simplifies VAT compliance globally, with automatic tax calculations and multi-currency support.
- Best For: International Shopify stores needing VAT automation.
- Price: From $49/month.
- Pros: Great for international tax compliance.
- Cons: Higher pricing.
4. Tax Rex: Best for U.S. Sales Tax Reports
- Rating: 4.9/5
- Key Features: Tax Rex offers automated sales tax reports, state tax registration, and nexus alerts.
- Best For: U.S.-based Shopify stores with state-specific tax needs.
- Price: From $5/month.
- Pros: Affordable tax reporting tool.
- Cons: Limited marketplace integration.
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5. Exemptify: Best for EU VAT Compliance
- Rating: 4.1/5
- Key Features: Exemptify helps with EU VAT compliance, including automatic VAT ID validation and sales tax calculations.
- Best For: EU-based Shopify stores.
- Price: $5/month.
- Pros: Simplifies VAT compliance.
- Cons: EU-focused only.
6. Easyship: Best for Calculating International Taxes and Duties
- Rating: 4.2/5
- Key Features: Easyship calculates taxes and duties for international orders, integrating seamlessly with Shopify.
- Best For: Stores with global shipping.
- Price: From $90/month.
- Pros: Calculates taxes and duties for over 200 countries.
- Cons: Expensive for small businesses.
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7. Taxdoo: Best for EU VAT and Accounting
- Rating: 4.8/5
- Key Features: Taxdoo automates EU VAT filing and integrates with accounting tools for seamless financial management.
- Best For: Shopify stores in Europe.
- Price: Free to install.
- Pros: Simplifies VAT reporting and tax compliance.
- Cons: EU-only focus.
8. Synder: Best for Accounting Sync
- Rating: 4.8/5
- Key Features: Synder syncs your Shopify sales tax with accounting software like QuickBooks and Xero.
- Best For: Shopify stores with complex accounting needs.
- Price: From $19/month.
- Pros: Perfect for automating tax reports and managing financial information.
- Cons: Requires integration with external accounting tools.
Read More:10 Best Shopify Accounting Apps
9. Dual Price Display (Exemptify): Best for VAT Display
- Rating: 4.7/5
- Key Features: Allows Shopify stores to display prices with and without VAT for B2B and B2C customers.
- Best For: Stores selling to both retail and wholesale customers.
- Price: From $5.99/month.
- Pros: Helps with transparent VAT pricing.
- Cons: VAT calculated at checkout.
Benefits of using taxes apps
1. Automated Tax Compliance
Tax apps automate the process of collecting and filing sales tax. This reduces manual errors and ensures your taxes are always filed on time. Apps like TaxJar and Sidr take care of filing sales tax returns, ensuring you’re compliant with both state and international tax laws.
2. Accurate Sales Tax Calculations
A Shopify tax app handles complex sales tax calculations by determining the correct tax rate for each sale, depending on location, state laws, or VAT for international orders. This ensures your customers are charged the correct amount, which is essential for maintaining accurate financial records.
3. Time and Cost Efficiency
Automating tax-related tasks reduces the time spent on manual tax filing and reporting. This frees up time for more important business activities and cuts down on costly errors that could result in penalties for non-compliance.
4. Real-Time Tax Reports
Tax apps generate real-time tax reports, which provide insights into how much tax you’ve collected and need to remit to authorities. This is particularly useful for businesses operating in multiple states or countries, as different tax jurisdictions may have different requirements.
5. Nexus Tracking and Alerts
For businesses subject to nexus rules, tax apps can track when your sales hit a new threshold, triggering a tax obligation in a particular state. This helps you avoid accidentally failing to collect sales tax in states where you’re legally required to do so.
6. Simplified VAT and International Tax Compliance
International merchants benefit from automated VAT compliance, with apps like Quaderno and Avalara helping to manage complex VAT filings across various countries. This ensures that you remain compliant with foreign tax laws, without having to navigate the complexities of different tax jurisdictions yourself.
7. Integration with Accounting Software
Many tax apps seamlessly integrate with popular accounting software like QuickBooks or Xero, making it easy to reconcile tax data with your financial reports. This integration saves time and ensures your records are accurate.
8. Global Support
For stores selling internationally, apps like Avalara and Easyship manage not only taxes but also duties and shipping charges. This helps merchants navigate international sales with ease, ensuring compliance with global tax laws.
How to Use Shopify Tax Apps
1. Choose the Right Tax App
- Browse the Shopify App Store and select the tax app that fits your business needs. Popular apps like TaxJar, Sidr, and Quaderno are excellent for handling sales tax, VAT, and tax compliance. Check out reviews and features before deciding.
2. Install the App
- Go to the Shopify App Store, find the tax app you want, and click on “Install”. The app will integrate with your Shopify dashboard.
- Most tax apps offer free trials, so you can test how they fit your store’s needs before committing to a paid plan.
3. Set Up Nexus and Tax Regions
- After installation, configure the app to track where you have nexus. Nexus determines where you need to collect sales tax based on your store’s physical presence or sales activities in different states or countries.
- Input the regions or states where your business operates, so the app can handle tax collection accurately.
4. Configure Tax Settings
- In the app’s settings, input your store’s tax rates, VAT requirements, or other applicable tax rules based on your location and the regions you sell to. Apps like TaxJar and Avalara automatically apply the correct tax rates based on local and international regulations.
5. Integrate with Accounting Software
- If you use external accounting software like QuickBooks or Xero, some apps (e.g., Synder) offer integration that syncs your sales tax data, tax reports, and transactions directly into your accounting platform. This helps streamline bookkeeping and reporting.
6. Generate Tax Reports
- Most tax apps automatically generate sales tax reports that break down the tax collected for different jurisdictions. You can export these reports and use them to file your taxes with the appropriate authorities.
- Apps like TaxJar also provide nexus alerts, reminding you of any new tax obligations as your business grows.
7. Automate Tax Filings
- Many apps will automatically file your sales tax returns with the appropriate state or national authorities. For example, Sidr and TaxJar can automatically submit these filings on your behalf, ensuring that you meet deadlines and stay compliant with local tax laws.
8. Monitor and Adjust Settings
- As your business expands, review and adjust your tax settings in the app. Keep an eye on nexus thresholds, changes in tax laws, or new markets you enter, and update your settings accordingly.
FAQs
What is a nexus, and why is it important for sales tax?
A nexus is a legal term that determines whether your business has a significant presence in a particular state or country, requiring you to collect and remit sales tax. Shopify tax apps track your nexus obligations and notify you when you reach new thresholds.
Do I need a tax app if I only sell in one state?
Even if you operate in one state, a tax app can help ensure your sales tax returns are accurate and filed on time. It also automates tax calculations, which can be especially useful if tax rates change.
Can Shopify tax apps handle international taxes like VAT?
Yes, many apps like Quaderno and Avalara are designed to handle VAT and other international tax obligations, making it easy for stores to stay compliant with global tax laws.
Can I integrate tax apps with accounting software?
Yes, tax apps like Synder and TaxJar allow integration with popular accounting software such as QuickBooks and Xero, making it easier to sync your tax and sales data for efficient financial management.
How do I know when to start collecting sales tax in a new state?
Many tax apps provide nexus alerts that notify you when you’ve reached the threshold for sales in a new state, helping you stay compliant by collecting and remitting taxes appropriately.
Are there free tax apps for Shopify?
Some Shopify tax apps offer free versions or trials, though advanced features, like automated tax filing or multi-region support, typically come with a paid plan. It’s always a good idea to check each app’s pricing structure before deciding.
Do I need to manually update tax rates in the app?
Most Shopify tax apps automatically update tax rates based on the latest tax laws, ensuring that you’re charging the correct amount at checkout.
Conclusion
Using a Shopify tax app is essential for ensuring smooth and efficient tax compliance. From automating sales tax calculations to generating detailed sales tax reports, these apps save you time and reduce the risk of errors in tax filing. Whether you’re dealing with US sales tax or international VAT, tax apps help you stay compliant and allow you to focus more on growing your business. Following the steps outlined above will help you set up and effectively use a tax app for your Shopify store, ensuring you’re always ahead of your tax obligations.
