Want to work with our team?
Get in touch
As a Shopify merchant, managing sales tax efficiently and accurately is critical to staying compliant and saving time. With the release of Shopify Tax at the end of 2024, you now have a native solution to consider alongside Avalara’s AVATax, which had previously been Shopify’s own preferred integration for Plus Stores.
What Is Shopify Tax?
Shopify Tax is Shopify’s newly released, built-in solution designed to simplify tax compliance directly within your Shopify admin. It automatically calculates and applies tax rates based on customer locations, ensuring your store meets the tax regulations in applicable jurisdictions. The tool offers region-specific features, such as real-time rate calculation for US sales tax and compliance support for EU VAT.
What Is Avalara AVATax?
Avalara’s AVATax is a third-party integration that still provides comprehensive tax calculation and reporting services. It’s a robust and established solution, particularly favoured by larger businesses with complex tax needs, such as multi-channel operations or those selling across multiple countries.
Key Comparisons
Ease of Use
Shopify Tax: Seamlessly integrates with your Shopify store, requiring minimal setup. Its native functionality means you won’t need to manage external accounts or systems.
AVATax: Offers more advanced features but requires integration and setup. Managing it involves switching between Shopify and Avalara’s platform.
Cost
Shopify Tax: Included for merchants with no additional integration fees. Shopify applies a fee on US orders where tax is calculated (up to 0.35% of the order subtotal). For smaller stores, this fee structure is straightforward and predictable.
AVATax: Requires a paid Avalara subscription, with pricing dependent on transaction volume and services used. Costs can quickly add up for businesses with high order volumes or more complex tax needs.
Features
Shopify Tax: Best suited for merchants in the US and EU, with key features such as jurisdiction-specific tax calculations, filing support, and automated updates when tax rules change. Additionally, Shopify Tax provides compliance tools like detailed reporting and tax-exempt support for qualifying customers.
The platform updates automatically as tax regulations evolve, ensuring your store remains compliant without additional effort. For US merchants, it includes advanced capabilities like economic nexus insights to help track thresholds in different states, and its EU VAT support includes one-stop-shop (OSS) reporting to streamline VAT obligations.
AVATax: Offers advanced capabilities like international tax compliance, cross-channel support, and detailed reporting. Its flexibility is unmatched for businesses operating in highly regulated or multi-national environments.
Scalability
Shopify Tax: Ideal for small to medium-sized businesses looking for simplicity and affordability.
AVATax: Better suited for large businesses with complex tax obligations and higher compliance demands.
So what?
Shopify Tax is a significant step forward for merchants seeking a native, low-maintenance solution to tax compliance on Shopify. However, AVATax remains a powerful option for those needing more comprehensive tax management. The choice ultimately depends on the complexity of your business operations and your budget.
If you'd like to discuss the next steps, please don't hesitate to get in touch.
Want to work with our team?
Get in touchOur thoughts
