Hey, it’s January: alongside the start of a new year, it’s also the time of year where new regulations and requirements suddenly appear for online sellers. Hurray!
One of the new changes for Shopify in 2025 is the announcement that they will now be collecting marketplace facilitator taxes automatically on all US nexus orders.
Let’s take a closer look into what this means for you, dear Shopify Seller.
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What is a Marketplace Facilitator Tax?
A marketplace facilitator tax is a type of sales tax that is collected by the platform or marketplace where the sale takes place. This means that instead of individual sellers collecting and remitting taxes, the marketplace itself is responsible for doing so on behalf of its sellers.
Why Is Shopify Collecting Marketplace Facilitator Taxes?
In 2018, the Supreme Court made a ruling in South Dakota v. Wayfair that changed how online sales are taxed. The ruling stated that states have the right to require out-of-state businesses to collect and remit sales tax if they have economic nexus, or a significant presence, in the state.
Since then, many states have enacted marketplace facilitator laws that require platforms like Shopify to collect and remit sales tax on behalf of their sellers. This helps ensure that all online sales are taxed fairly and accurately.
How does Shopify collect Marketplace Facilitator Tax?
When you sell through the Shop sales channel in the United States, the marketplace sales tax is automatically deducted from your Shopify Payments payouts. In the event of a refund, the marketplace sales tax is retransferred back to your Shopify Payments. All transactions associated with these orders are marked for clarity and transparency in your payout details and tax reports.
As a Shopify seller, you may still need to account for these transactions in your reports to your local or state authority. If you use the Shopify Tax automated filing, these transactions will be included as required. Some states also factor in marketplace transactions within their nexus requirements. So, if you’re using Shopify Tax, these transactions will be considered while calculating your tax liability insights.
It’s important to remember that tax norms and requirements can vary, so it’s advisable to consult a tax professional to verify the tax requirements for your business. Some states might ask for the Shop sales channel tax collection certificate during an audit.
Should you need a copy of this certificate, you can simply contact Shopify support.
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Try Craftybase - the inventory and manufacturing solution for Shopify sellers. Track raw materials and product stock levels (in real time!), COGS, shop floor assignment and much more.
It's your new production central.
Staying Tax Compliant as a Shopify Merchant
While it’s great news that Shopify will now automatically collect and remit marketplace facilitator taxes for their US merchants, it’s still important for merchants to stay up-to-date with changing tax laws and regulations.
Here are some tips for staying tax compliant:
- Stay informed about new tax laws and regulations: Keep an eye out for any updates or changes in your state’s sales tax laws and regulations. This will help ensure that you are always collecting and remitting the correct amount of taxes.
- Keep detailed records: It’s important to keep track of all your sales, including any marketplace facilitator taxes that have been collected by Shopify. This will make it easier when it comes time to file your taxes.
- Consider consulting a tax professional: If you’re unsure about your tax obligations as a Shopify merchant, it may be beneficial to consult with a tax professional who can provide personalized advice for your business.
How Craftybase Can Help with Tax Compliance
Craftybase offers robust tools to help Shopify sellers accurately track order revenue and taxes, ensuring compliance with state and federal requirements.
Our platform seamlessly integrates with your Shopify store to automatically capture detailed sales data, including tax amounts, and generate clear, comprehensive tax reports.
Additionally, Craftybase’s Shopify inventory management features allow you to track costs and inventory levels in real time, linking material expenses to orders for precise cost-of-goods calculations. By consolidating order, inventory, and tax data in one place, Craftybase simplifies your accounting processes and provides peace of mind during audits.
So now that you know about facilitator taxes, you can make sure your e-commerce business stays tax compliant, ensuring a hassle-free and seamless operation and a less stressful start to 2025. Cheers to that!
