Sales Tax Guide For Shopify Sellers

Shopify lets you configure and collect taxes worldwide: you can define VAT rates by country, apply product-level exemptions, and distinguish B2B from B2C sales. For many international sellers, that is enough.

For sellers who need to go further, several gaps remain. Shopify does not generate tax-compliant invoices in every market, does not cover e-invoicing mandates, does not alert you when you approach a registration threshold in any jurisdiction, and only files tax returns in the US.

This guide covers how to configure taxes in Shopify step by step, which compliance obligations the platform cannot handle, and where a tax plugin closes those gaps.

How to configure taxes in Shopify

The basic tax configuration in Shopify takes five steps. Together they make the platform apply the rate you define at checkout based on the buyer's country and product type. What they do not cover, we address in the next section.

1. Access the tax settings

Go to Settings > Taxes and duties. From here you control tax collection across all the regions where you sell. Shopify organises the configuration by country: each region has its own rate rules and exemptions.

2. Enable collection by region

For each country or state where you are registered, click the region and enable tax collection. For international sales, enable each destination country separately.

Shopify Tax, the platform's paid service, handles VAT calculation automatically for the EU, UK, and Canada, and sales tax for the US. For all other countries, rate configuration is manual.

3. Configure rates by country

Within each region, enter the applicable VAT or tax rate. For an international seller, typical rates to configure are:

• Standard rate: the default rate that applies to most goods and services (e.g. 20% UK VAT, 10% Australian GST, the applicable US sales tax rate).
• Reduced rate: for specific product categories such as food, books, or healthcare in countries with differentiated rates.
• Zero rate: for goods and services that are legally exempt or zero-rated, such as certain exports or financial services.

If a country applies multiple reduced rates, configure a separate rate for each one.

4. Configure product exemptions

Shopify lets you create tax overrides for products that carry a rate different from the standard. If you sell reduced-rate or zero-rated products, assign the correct override in each product's settings under Product data > Tax.

5. Configure price display

In Taxes and duties choose whether prices are shown with or without tax in the shop, cart, and checkout. This affects the buyer's experience, not the tax calculation itself.

With these five steps, Shopify applies whatever rates you configure to each order. What it does not do is resolve the compliance obligations that go beyond rate application.

Shopify tax limitations for international sellers

The five configuration steps cover the basics: applying the rate you define on each order. Real tax compliance goes further. None of these points have a native solution in Shopify.

No fully compliant invoices

Shopify generates basic order receipts. Shopify Tax adds VAT invoices for EU and UK sales, but mandatory fields can still be missing: the buyer's business tax ID for B2B transactions, the reverse charge notation, and the breakdown of tax by rate. You can see the full list of required fields on a compliant tax invoice. An invoice with incomplete fields can be rejected by the buyer, who loses the right to deduct the input tax they paid.

No e-invoicing compliance

Many tax authorities now require invoices to be transmitted to a government portal in a structured digital format before they are legally valid. Shopify has no mechanism for this. The markets where it already applies include:

• EU: France, Germany, Italy, Spain, and Poland have introduced or mandated B2B e-invoicing, with more countries following under the EU's ViDA initiative.
• Latin America: Brazil's NF-e and Mexico's CFDI require invoices to be authorized by the tax authority at the moment of issuance.
• Middle East: Saudi Arabia (ZATCA) and the UAE require cryptographically signed e-invoices with near-real-time reporting.
• Asia-Pacific: India requires an Invoice Registration Number (IRN) from a government portal before an invoice is legally effective.

If you sell in any of these markets, compliance requires software that integrates with the relevant authority's API or network.

No registration threshold alerts

Shopify does not monitor your sales by market or alert you when you approach a registration threshold. This affects every market you sell in: the €10,000 EU OSS threshold for cross-border B2C sales, the US economic nexus thresholds (typically $100,000 or 200 transactions per state), AUD 75,000 in Australia, and £90,000 for UK VAT. You can cross any of them without realizing it and accumulate a tax liability for months with no legal cover.

No international tax filing

Shopify Tax files US sales tax returns automatically. Outside the US, submitting returns to each tax authority — the EU OSS quarterly declaration, a GST return in Australia or Canada, or any other international jurisdiction — is always the seller's responsibility.

If you would rather not manage all of this manually, the Quaderno plugin for Shopify automates each of these points.

The Quaderno plugin for Shopify

The Quaderno plugin for Shopify covers exactly that manual work. Here is what it automates and how it compares to the other options on the market.

Features

Tax-compliant invoices, automatically. With every sale, an invoice is automatically sent with all required fields, in the buyer's language and currency, compliant with the tax rules of their jurisdiction.

E-invoicing compliance. For markets that require structured digital invoicing, the plugin generates and transmits invoices in the required format, without additional integration work on your end.

Registration threshold alerts. The plugin monitors your sales by region and alerts you before you reach the EU OSS threshold, a US state economic nexus limit, or any other registration trigger, so you can act before it becomes mandatory.

Instant tax reports. With one click you get a report with the totals by country and rate, ready to complete any standard tax return.

International tax filing. Quaderno files tax returns in more than 50 countries: the US, Australia, Canada, Singapore, New Zealand, and the entire EU, among others. You do not need to log into each authority's portal — Quaderno handles the submission for you.

Multi-channel management. If you sell across multiple channels — Amazon, Shopify, WooCommerce, PayPal, or others — Quaderno centralises all your tax data in one place, without managing each platform separately.

Comparison

Plugin	Automatic invoices	E-invoicing	Threshold alerts	Tax reports	Tax filing
Quaderno	Yes	Yes	Yes	Yes	Yes
Shopify Tax	Partial	No	US only	Yes	US only
AvaTax (Avalara)	No	Partial	Yes	Yes	Yes

Shopify Tax covers automatic VAT calculation for the EU, UK, and Canada, and sales tax for the US, but does not handle e-invoicing mandates, threshold alerts outside the US, or tax filing outside the US. Avalara covers more markets but is oriented to large enterprises: the setup is more technical, pricing is not public, and the cost is difficult to evaluate for a mid-size store.