Sales Tax for Shopify and Etsy Sellers: Nexus, Rates, Filing and Penalties
Etsy collects and remits US sales tax for you; Shopify only calculates it, so you register, file and pay. Nexus thresholds, the math, due dates and penalties.
If you sell on Shopify or Etsy, sales tax is easy to get wrong because the two platforms handle it very differently. On Etsy, the platform collects and pays the tax for you in every US state that has one. On Shopify, the platform works out the tax at checkout, but the legal duty to register, file and pay belongs to you.
This guide explains how sales tax is calculated, when a state can require you to collect it (nexus), what each platform does and does not do, and how filing deadlines and penalties work. Rules differ by state and change often, so treat it as a starting point and confirm the details with each state's revenue department or a tax professional.
In this guide:
- How to calculate sales tax, forwards and backwards
- What nexus is, and the 2026 thresholds in ten large states
- What Etsy does for you, and what it does not
- What Shopify Tax does, and what you still have to do
- Filing frequency, due dates and late penalties
- Practice problems and the most common mistakes
Quick Answer
Etsy vs Shopify: who does what
Etsy (marketplace facilitator)
On orders shipped to US buyers in every state with a sales tax.
- Covers all 45 states with a statewide sales tax, plus DC and Puerto Rico
- Sellers cannot opt out, and there is no extra fee
- Does not cover sales on your own website or at markets
Shopify (your own store)
Shopify is not a marketplace facilitator for your store.
- Shopify Tax calculates the right rate at checkout and collects it from the buyer
- You hold the permits, file the returns and send the money to each state
- Shopify's automated filing service is closed to new enrolment
Sources: Etsy Help Center ("Etsy automatically calculates, collects, and remits US sales tax"); Shopify Help Center (Shopify Tax and automated filing pages), checked October 2026.
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| Topic | Rule of thumb |
|---|---|
| States with no statewide sales tax | Alaska, Delaware, Montana, New Hampshire and Oregon (Alaska towns can still levy local sales tax) |
| Common economic nexus threshold | $100,000 of sales into the state in a year; $500,000 in California, New York and Texas |
| Transaction-count tests | About 16 states still have one (usually 200 sales); many have dropped it |
| Which rate to charge | Remote sellers generally charge the rate at the buyer's ship-to address |
How to Calculate Sales Tax, Step by Step
- Step 1: Find the price before tax. Example: $50.
- Step 2: Find the combined rate for the buyer's address (state + county + city + any special district). Example: 7%.
- Step 3: Multiply. $50 × 0.07 = $3.50 tax.
- Step 4: Add. $50 + $3.50 = $53.50 total.
What the buyer pays on a $50 item at 7%
- Item price (yours)50 USD(93.5%)
- Sales tax (the state's)3.5 USD(6.5%)
Total: 53.5 USD
The tax is not your income. You hold it in trust for the state, so keep it separate from your revenue.
Worked example 1: a single rate
A $75 item with 6% sales tax: $75 × 0.06 = $4.50 tax, so the buyer pays $79.50.
Worked example 2: state plus local tax
A $200 order shipped to an address with a 5% state rate and a 2% local rate: combined rate 7%, tax $200 × 0.07 = $14, total $214. Always add the rates first and apply the combined rate once.
Worked example 3: working backwards from a total
A buyer paid $108 including 8% tax. The pre-tax price is $108 ÷ 1.08 = $100, and the tax is $8. Do not take 8% off $108: that gives $99.36, which is wrong because the 8% was charged on $100, not on $108.
Use the Sales Tax CalculatorAdd tax to a price or pull it out of a tax-inclusive total, with state and local rates combined.Selling to buyers outside the US? Most other countries charge VAT or GST instead, usually included in the shelf price. The VAT calculator adds or removes VAT, and the GST and sales tax guide explains how those systems differ from US sales tax.
What Is Nexus, and When Do You Have to Collect?
Nexus is a connection with a state that is strong enough for the state to require you to collect its sales tax. Before 2018 that meant a physical presence. Since the Supreme Court's decision in South Dakota v. Wayfair (June 21, 2018), states can also require collection from remote sellers whose sales into the state pass an "economic nexus" threshold.
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| Type | What triggers it | Example |
|---|---|---|
| Physical nexus | An office, warehouse, stock, employees or regular in-person selling in the state | You store inventory in a California warehouse |
| Economic nexus | Sales into the state above its dollar (and sometimes transaction) threshold | $120,000 of sales to Florida buyers last year |
| Marketplace facilitator rules | The platform, not you, is responsible for tax on its orders | Etsy collects on Etsy orders |
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| State | Sales threshold | Transaction test | Measured over | Do marketplace sales count? |
|---|---|---|---|---|
| California | $500,000 | None | Current or previous calendar year | Yes |
| Texas | $500,000 | None | Previous 12 calendar months | Yes |
| New York | $500,000 | And more than 100 sales | Previous four sales tax quarters | Yes |
| Florida | $100,000 | None | Previous calendar year | No |
| Illinois | $100,000 | None (the 200-sale test ended January 1, 2026) | Previous 12 months, checked quarterly | No |
| Pennsylvania | $100,000 | None | Previous 12 months (calendar year) | Yes |
| Washington | $100,000 | None | Current or previous calendar year | Yes |
| Georgia | $100,000 | Or 200 sales | Current or previous calendar year | No |
| Ohio | $100,000 | Or 200 sales | Current or previous calendar year | Yes |
| North Carolina | $100,000 | None (dropped July 1, 2024) | Current or previous calendar year | Yes |
Economic nexus sales thresholds (US$ thousands)
Most states use $100,000. The three largest economies set the bar five times higher.
California
New York (and 100+ sales)
Texas
Florida
Georgia (or 200 sales)
Illinois
North Carolina
Ohio (or 200 sales)
Pennsylvania
Washington
Source: state revenue departments as summarised in the Sales Tax Institute economic nexus chart, checked October 2026. Illinois confirmed from its Department of Revenue bulletin FY 2026-12.
Watching a threshold: cumulative sales to one state through the year
An example shop selling about $10,000 a month to Washington buyers (Etsy and Shopify combined) passes $100,000 in October.
- Cumulative sales ($k)
- $100k threshold
Illustrative figures. Check each state's rule for when collection must start after you cross; it differs from state to state.
Do I need to collect sales tax in a state?
Does the state have a sales tax?
Not in Delaware, Montana, New Hampshire or Oregon. Alaska has local taxes only.
Do you have physical nexus there?
Stock, an office, staff or regular in-person sales. If yes, you must register.
Are you over its economic threshold?
Add up sales into the state over the state's period, counting marketplace sales where the state says so.
Register, then collect
Get a permit before you collect. Charge tax on sales the marketplace does not already cover.
Etsy Sales Tax: What the Marketplace Does for You
Etsy's Help Center says Etsy "automatically calculates, collects, and remits US sales tax" on orders shipped to US buyers, for sellers located anywhere in the world. Its list covers every state with a statewide sales tax, plus Washington DC, Puerto Rico and Alaska's local taxes. Sellers cannot opt out, and Etsy does not charge a fee for this.
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| Situation | Who handles sales tax? |
|---|---|
| Etsy order shipped to a US state with sales tax | Etsy collects and remits |
| Sales on your own Shopify or Squarespace site | You |
| Craft fairs, pop-up markets and in-person sales | You (usually a permit in the state where you sell) |
| Your income from Etsy sales | You, on your income tax return; this is a separate tax |
Etsy shows the tax it collected as "Sales tax paid by buyer (Remitted)" in your payment account. That amount is not part of your income. Keep those reports: they are your evidence if a state asks why you did not file.
Shopify Sales Tax: What You Still Have to Do
Shopify is not a marketplace facilitator for your own store. Shopify Tax works out the right rate at checkout for thousands of US tax jurisdictions and collects it from the buyer, and it can alert you as you approach a state's threshold. Registering, filing returns and paying the tax remain your job. Shopify's Help Center says its automated filing service is closed to new enrolment, so a new store should plan to file itself or use a third-party filing app or accountant.
- Step 1: Work out where you have nexus (your home state almost always, plus any state over its threshold).
- Step 2: Register for a sales tax permit in each of those states before you collect.
- Step 3: In Shopify admin, go to Settings > Taxes and duties > United States and add each state where you are registered, with its tax ID.
- Step 4: Set product tax categories so exempt items (some clothing or food, for example) are taxed correctly.
- Step 5: File and pay each state on the schedule it gives you, using Shopify's tax reports.
Origin or destination? A remote seller generally charges the rate at the buyer's address. Some states (for example Arizona, California in part, Illinois, Mississippi, Missouri, Ohio, Pennsylvania, Tennessee, Texas, Utah and Virginia) use the seller's location for sales between two parties in the same state. Shopify Tax applies these rules for you once a state is set up.
Filing Frequency, Due Dates and Penalties
Each state assigns you a filing frequency when you register, usually monthly, quarterly or annually, based on how much tax you collect. Higher volumes file more often. Quarters are calendar quarters (January to March, April to June, and so on), and each state sets its own due day.
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| Quarter | Texas | California |
|---|---|---|
| January to March | April 20 | April 30 |
| April to June | July 20 | July 31 |
| July to September | October 20 | October 31 |
| October to December | January 20 | January 31 |
Monthly filers in Texas are due on the 20th of the following month; in California, by the end of the following month. Florida returns are due on the 1st and late after the 20th. If a due date falls on a weekend or holiday, it usually moves to the next business day.
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| State | Late penalty | Plus |
|---|---|---|
| Texas | $50 per late report, 5% of tax due if 1 to 30 days late, 10% after 30 days | Interest after 60 days |
| California | 10% of the tax for a late return or late payment | Interest for each month or part month |
| Florida | 10% of the tax, minimum $50 (even if no tax was due) | Interest |
Practice Problems (With Answers)
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| Problem | Working | Answer |
|---|---|---|
| 1. $150 item at 6%. Total? | $150 × 0.06 = $9; $150 + $9 | $159 |
| 2. Buyer paid $214 including 7%. Pre-tax price? | $214 ÷ 1.07 | $200 |
| 3. $80 item, 4% state + 3% local. Total? | 7% of $80 = $5.60 | $85.60 |
| 4. $120,000 of sales to Texas. Over the threshold? | Texas threshold is $500,000 | No |
| 5. $150,000 of your own-website sales to Florida. Over? | Florida threshold is $100,000 | Yes |
| 6. $70,000 Etsy + $40,000 Shopify sales to Washington. Over? | Washington counts marketplace sales: $110,000 | Yes |
Common Sales Tax Mistakes
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| Mistake | Fix |
|---|---|
| Assuming Etsy covers your website sales too | Etsy only covers Etsy orders. Track your own channels separately. |
| Assuming Shopify files for you | Shopify calculates and collects. You file and pay, or hire someone to. |
| Collecting tax without a permit | Register first. Collecting without a permit can itself break state law. |
| Charging your home rate to every buyer | Remote sales generally use the buyer's ship-to rate, including local taxes. |
| Taking the rate off a tax-inclusive total | Divide by (1 + rate) to find the pre-tax price. |
| Not tracking sales by state | Review sales per state monthly, including marketplace sales where they count. |
| Skipping $0 returns | File every period while a permit is open. |
| Throwing away records | Texas and California require at least four years of records; keep exemption certificates too. |
Frequently Asked Questions
Does Etsy collect sales tax for me?
Yes, on Etsy orders shipped to US buyers in every state with a sales tax, plus DC, Puerto Rico and Alaska's local taxes. You cannot opt out. It does not cover your sales on other channels.
Does Shopify collect and pay sales tax for me?
Shopify Tax calculates and collects tax from buyers at checkout, but you are responsible for registering, filing and paying the states. Its automated filing service is closed to new enrolment.
What is the economic nexus threshold?
Most states use $100,000 of sales into the state in a year. California, New York and Texas use $500,000, and New York also requires more than 100 sales. About 16 states still have a transaction-count test.
Which states have no sales tax?
Alaska, Delaware, Montana, New Hampshire and Oregon have no statewide sales tax. Alaska towns and boroughs can still charge local sales tax, and Etsy collects those.
Do I need to register for sales tax to sell on Shopify?
You need a permit in every state where you have nexus, which nearly always includes your home state if it has a sales tax. Register before you start collecting.
What is Form 1099-K, and is it about sales tax?
Form 1099-K reports payments you received through a platform, for income tax, not sales tax. For 2026 a platform must issue one only if you received more than $20,000 across more than 200 transactions, after a 2025 law restored that threshold. Your sales are taxable income whether or not you receive the form.
How long should I keep sales tax records?
At least as long as each state requires. Texas and California both require four years, and longer if you are under audit.
Final Summary
- Sales tax = price × rate; working backwards, price = total ÷ (1 + rate).
- Etsy collects and remits on Etsy orders; Shopify calculates, but you register, file and pay.
- Nexus comes from physical presence or from passing a state's economic threshold, usually $100,000.
- In many states your Etsy sales count toward your threshold even though Etsy pays the tax.
- File on time every period, including $0 returns, and keep records for at least four years.
For pricing that includes tax, the complete price quote guide shows where sales tax fits after markup and overhead, and the Excel sales tax and VAT guide builds the same formulas in a spreadsheet. If you sell bundles, the product bundling math guide shows how to count and price them.
Written by
Do The Calculation Team
Do The Calculation
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