Shopify dropshippers must determine where they have sales tax nexus before deciding where to collect tax. The answer is based on the seller's connections to each state, not simply on where the supplier ships from.
Three types of nexus
| Type | How it can arise |
|---|---|
| Physical nexus | An office, employee, inventory, or warehouse |
| Economic nexus | A state-specific sales or transaction threshold |
| Marketplace nexus | Rules connected to a platform that facilitates sales |
Thresholds vary. Many states use a $100,000 sales threshold, while others use a transaction count or both. California and Texas use higher thresholds, and rules change, so confirm current requirements for every state where you sell.
Shopify's role
Shopify can calculate tax using configured settings, but merchants remain responsible for determining obligations and filing where Shopify does not collect and remit on their behalf. Marketplace facilitator treatment also varies by state.
Staying compliant
Register in states where you have an obligation, configure product and shipping taxability correctly, maintain resale certificates, and keep records of direct versus marketplace-facilitated sales.
Kintsugi can monitor nexus, calculate tax, and support registration and filing across the states where a Shopify business is responsible for compliance.
