Before You Start

This guide assumes you have a Shopify Plus plan and an active Avalara AvaTax subscription. Ensure your product tax codes are configured in Shopify.

Overview

40 min
Setup Time
Advanced
Difficulty
Quarterly
Maintenance

What You’ll Learn

  • How to configure Shopify for AvaTax integration
  • Automating sales tax calculation at checkout
  • Managing nexus and tax exemptions efficiently
  • Streamlining sales tax reporting and filing

1. Preparation Steps

Ensure these prerequisites are met before integration:

Required Credentials & Data

  • Shopify Admin Access & API Keys (if applicable)
  • Avalara Account Credentials (username, password, account ID, license key)
  • Accurate Physical Nexus Addresses (in Avalara)
  • Product Tax Codes (PTCs) for all products in Shopify

Optional (but recommended)

  • Tax Exemption Certificates (for B2B sales)
  • Customer-specific tax rules (e.g., non-profit status)
  • Avalara CertCapture (for automated exemption management)

2. Key Considerations

You have two main approaches to sales tax in Shopify.

Method A: Avalara AvaTax for Shopify

This is the recommended solution for complex tax scenarios.

Pros:
  • Real-time, accurate tax calculation.
  • Automated nexus tracking.
  • Streamlined filing and reporting.
Cons:
  • Requires Avalara subscription.
  • Initial setup complexity.
  • Potentially higher cost for high volume.

Method B: Manual Tax Setup in Shopify

This is Shopify’s built-in tax engine, suitable for very simple needs.

Pros:
  • No extra subscription fees.
  • Simple for single-state businesses.
  • Direct control over tax rates.
Cons:
  • Error-prone for multi-state.
  • No automated nexus tracking.
  • Manual filing burden.

Expert Tip: For high-volume, multi-state e-commerce, using Avalara AvaTax is critical for accurate compliance and audit readiness. Manual tax configuration in Shopify is only viable for very simple, low-volume scenarios.

3. Step-by-Step: Integrating with AvaTax

Integrating Avalara AvaTax with Shopify creates a robust, automated sales tax solution. This involves connecting the two platforms and configuring your tax settings.

Here is a sample code block to show how an API call for a sales transaction might look with tax codes.

{
  "order_id": 98765,
  "customer_id": "CUST-001",
  "total_amount": 250.75,
  "line_items": [
    { "product_id": "SHOES-001", "quantity": 1, "price": 150.00, "tax_code": "PC040100" },
    { "product_id": "SOCKS-005", "quantity": 2, "price": 25.00, "tax_code": "PC040100" },
    { "shipping_method": "Expedited", "amount": 50.75, "tax_code": "FR000000" }
  ]
}

4. Setting Up Avalara Integration

  1. 1

    Install AvaTax App in Shopify

    Locate and install the Avalara AvaTax app from the Shopify App Store. This is the primary connector.

  2. 2

    Connect Your Avalara Account

    Within the installed Shopify app, enter your Avalara AvaTax account credentials (Account ID, License Key). Configure your company profile and nexus addresses in Avalara’s dashboard.

  3. 3

    Map Product Tax Codes (PTCs)

    Assign appropriate Avalara Product Tax Codes to your Shopify products or collections. This tells AvaTax how to classify each item for tax purposes.

Common Error: Incomplete Nexus Setup

Ensure all your physical locations (warehouses, offices, remote employees) are correctly entered as nexus addresses in Avalara. Incorrect nexus can lead to inaccurate tax calculations and compliance issues.

5. Testing Your Setup

Integration Test Checklist

  • Process a test order shipping to a nexus state
  • Verify calculated tax amounts match Avalara’s tax calculator
  • Test an order for a tax-exempt customer (if applicable)
  • Confirm tax data is appearing correctly in Avalara reports

Need Help?

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Having trouble with your tax automation? Our experts specialize in e-commerce tax compliance and Avalara integrations.

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