The US Census Bureau estimated that total US ecommerce sales reached $1.23 trillion in 2025, accounting for 16.4% of total retail sales. A retailer’s tax responsibilities change depending on the market.
Each order can involve different state, county, city, product, and nexus rules. Sales tax software helps ecommerce businesses by calculating rates, tracking registration requirements, and preparing tax filing.
This guide covers the features to look for in sales tax software and how to choose an option for your business.
What is sales tax software?
Sales tax software can automate the calculation, reporting, and filing of taxes for commerce brands. It identifies the correct tax rate for every order based on the buyer’s address. These tools also monitor tax nexuses to identify where a brand has a legal obligation to collect tax.
Sales tax software is different from ecommerce accounting software. Accounting apps manage a brand’s general finances, while sales tax software tracks the rules of thousands of jurisdictions. Automation handles the data, but store owners must still register for sellers permits and confirm product categories.
It handles compliance tasks, including:
- Categorizing products for accurate rates
- Generating reports for tax authorities
- Managing exemption certificate management for wholesale buyers
- Supporting international taxes like VAT and GST
Shopify Tax includes liability insights to track compliance, rooftop-level accuracy for US calculations, and smart suggestions based on product categories.
US store owners can set up automated filing and remittance for a flat fee per return and avoid late penalties. Some retailers find that Shopify Tax handles their workflow, so they don’t look for other software.
“We no longer need to manually update sales tax information, saving us countless hours and reducing the risk of errors. It’s been a game-changer for our small business,” says Ailee Fei, founder of Daily Charme.
What to look for in sales tax software
Good sales tax software should accurately calculate tax, show where a brand needs to register, and prepare filing data. Look for these five features when considering sales tax software:
Accurate calculations at the jurisdiction and product level
Tax reporting requires knowledge of state, county, and local laws. Shopify’s US sales tax report organizes this information at those levels.
Verify that your software has:
- Address-level accuracy
- Product-specific taxability rules
- Management for exemptions and overrides
- Support for special categories like clothing or digital goods
Check whether the tool has product categories or tax codes for special items. Shopify’s product categories help identify items that qualify for special rates and exemptions.
Nexus visibility and registration support
Regions have different rules for physical and economic nexuses. Software that tracks your sales volume and revenue can alert you before you cross these thresholds in multiple jurisdictions.
Threshold alerts are important for direct-to-consumer brands because sales into new locations can create new review work. In Shopify, you can review potential liabilities in the taxes and duties settings.
Software can alert you to an obligation, but it can’t complete state and local sales tax registration. Consult a tax professional for questions about your business.
Filing workflows and reporting
Consider a software that helps you file taxes or share tax data with an accountant.
Detailed reporting at the jurisdiction level is necessary. Shopify’s Jurisdiction report, for example, shows taxes collected in every state, county, and city.
Audit trails connect filed amounts to the original orders. Software should store:
- Customer addresses
- Tax jurisdictions
- Product categories
- Exemption statuses
Check the scope of automated filing. Shopify Tax supports automated filing for US states. You’re responsible for consulting tax authorities to file and remit sales tax correctly.
International support
Software that only supports US markets won’t cover your needs internationally. For example, if you sell overseas to UK consumers, prioritize software that includes VAT collection settings and registration support. Brands may need to acquire a VAT number depending on the value of orders, according to Shopify’s UK Tax registration documentation.
Merchant-of-record models change legal responsibility for international ecommerce. With Shopify Managed Markets, Global-e is the merchant of record. They’re the entity responsible for selling products to customers and complying with local laws in another country or region.
Integration with commerce stack
Match the software to your commerce stack before you launch. Shopify Tax is available to US sellers for in-person sales through Shopify POS, as well as those with online stores.
Review which system operates settings for accounting and multistore setups. Your tax plan should cover product categories, exemptions, and filing responsibilities before you start collecting.
Best sales tax software options
A good sales tax software helps merchants calculate how much tax must be collected, file returns seamlessly, and register with local jurisdictions.
Explore the following sales tax software options:
Shopify Tax
Shopify Tax is for stores that use the Shopify admin to calculate taxes and generate reports. It features liability alerts and product categorization. Store owners pay after reaching a sales threshold.
- Strengths: Provides liability insights to track nexus thresholds.
- Trade-offs: Limited to Shopify sellers.
- Pricing: Free for a US store’s first $100,000 in annual or lifetime sales (depending on when your store was created) and then cost 0.25% to 0.35% per order (99¢ max per order). A flat fee ($50 to $75) is charged for automated filing in the US, per return, based on your Shopify plan.
Tax Rex
Tax Rex helps brands manage sales tax reports and filing on state portals. It has an economic nexus dashboard to help merchants track registration needs. The software allows merchants to ignore orders from marketplaces like Amazon or eBay.
- Strengths: Generates reports based on taxes collected in Shopify.
- Trade-offs: Focuses on US sales tax and does not support international taxes or VAT compliance.
- Pricing: Plans start at $10 per month covering 200 orders.
TaxCloud
TaxCloud manages registrations and filings for Shopify brands. It is a certified service provider in the Streamlined Sales Tax program. This status allows them to provide discounts in 24 member states.
- Strengths: Provides daily syncing of Shopify orders and track state compliance.
- Trade-offs: Doesn’t support international sales tax collection.
- Pricing: Subscription costs based on seller platform and order volume.
BreezyFile
BreezyFile works with Shopify Tax to prepare and file returns in every US state. Store owners can view filing history and upcoming returns. BreezyFile manages state registrations after a store owner submits information once.
- Strengths: Uses order data to identify tax owed and file automatically by due dates.
- Trade-offs: Base costs are higher than some competitors.
- Pricing: A $75 fee per filing and $150 per state registration.
Sidr
Sidr is a US-based solution for sales tax reports and automated filing. It manages the sales tax compliance process, including nexus tracking and registration.
- Strengths: Free plan offers nexus monitoring across all states and live chat support.
- Trade-offs: High individual registration fee.
- Pricing: Standard plan charges $60 fee per filing and $150 per registration plan adds automated filing.
Avalara
Avalara is a cloud-based tax engine that helps determine enterprise tax obligations. Sellers can add the software to their Shopify store as a tax app. Shopify doesn’t charge an additional fee to integrate the software.
Avalara is available on any Shopify plan, however, those on Shopify Plus or Shopify Enterprise Commerce plans can use one connection for multiple business entities. Avalara setup for these sellers requires Shopify Payments and each entity to be assigned to their respective markets.
- Strengths: Manages tax compliance internationally.
- Trade-offs:. Requires a contract with Avalara.
- Pricing: Price is based on services contracted.
How to choose the right sales tax software
Choosing between native tax tools and third-party platforms depends on your technical architecture and where you sell.
This comparison can help you decide which path fits your business:
| Stay native | Go partner-led |
|---|---|
| Centralize operations. Use Shopify Tax to manage compliance within the Shopify admin. | Integrate existing stacks. Connect tools like Avalara or Vertex. |
Choose Shopify Tax if you:
- Sell primarily on Shopify
- Require tax tools for supported regions
- Need calculation accuracy and reporting
- Minimize operational overhead
Fairfax & Favor used Shopify Tax to monitor nexuses down to the local level and support international sales. It estimates £1.05 million in annual savings using Markets, Multi-Currency Payouts, and Shopify POS.
Use a third-party tax software if you:
- Manage complex exemption certificate workflows
- Use an ERP or custom enterprise architecture
- Standardize tax operations around platforms like Avalara, Vertex, or Sovos
- Require audit or registration services
World of Books previously custom-built the integration between its third-party tax tool and other systems. On Shopify, it’s able to set up new tools out of the box to integrate with other parts of the shop.
“Consolidating all these tools into a single package significantly reduced maintenance costs and boosted our productivity. It allowed us to focus on what truly matters, rather than managing disparate systems,” says Zsolt János, engineering director at World of Books.
Sales tax software FAQ
What is the best sales tax software for Shopify merchants?
Shopify Tax is a tool for brands that sell on the platform and want to manage compliance, liability insights, and reporting in their admin.
Brands can also integrate third-party tools like Avalara, TaxCloud, or Sidr for filing and registration support.
Does sales tax software file and remit taxes automatically?
Yes, solutions like Shopify Tax and BreezyFile offer automated filing and remittance services in the US for a fee. The software handle data and submission, but store owners are responsible for state registrations and product categories.
Do small businesses need sales tax software?
Sales tax software can help small businesses avoid costly penalties and audits by automating tax compliance across jurisdictions. It also can help with tax management, including tax calculation, return preparation, and more.
What should international sellers look for in tax software?
International sellers need software that supports local tax collection, such as VAT or GST, along with registration support. A merchant-of-record model like the one offered by Shopify Managed Markets handles local tax laws in foreign regions.
How much does Shopify Tax cost?
Shopify Tax is free for a US brand’s first $100,000 in annual or lifetime sales (depending on when the store was created). Transactions fees are 0.25% to 0.35%, up to 99¢, per order after that threshold. US store owners who set up automated filing are charged a $50 to $75 fee per return based on their Shopify plan.
