Big Changes Coming for Shopify Plus Users Relying on AvaTax

If you’re a Shopify Plus merchant currently using AvaTax, get ready—Shopify is making significant changes to its sales tax compliance tools, and the transition won’t be as simple as flipping a switch.

Starting April 30, 2025, Shopify will discontinue its existing Avalara integration (previously managed by Shopify) and replace it with two new options:

• Shopify Tax – Shopify’s in-house tax engine
• Avalara for Shopify – A new integration powered by Avalara’s AvaTax engine

While this might seem like a straightforward change, many sellers are finding the decision more complex than expected. Let’s break down what’s happening so you can choose the best option for your business.

What’s Changing for Shopify Plus Sellers?

For years, Shopify relied on Avalara’s AvaTax as its tax calculation engine, bundling it into Shopify Plus subscriptions. Shopify launched Shopify Tax in 2022 for US transactions. 

Now that Shopify has completed its tax engine, it is discontinuing the old Avalara integration and transitioning to two separate options:

1. Shopify Tax (Shopify’s proprietary tax engine)
2. Avalara for Shopify (a new app managed directly by Avalara)

This means that ALL legacy AvaTax users must choose between migrating to Shopify Tax or switching to Avalara’s new integration. The deadline to decide is April 30, 2025.

If you are already using Shopify Tax, no action is needed.

Comparing Your Tax Engine Options

If you are currently using AvaTax in Shopify, you now have two paths forward:

Option 1: Switch to Shopify Tax

Key Features:

• Uses rooftop calculations for precise tax rates based on full addresses.
• Automatically updates tax rates for holidays and jurisdiction changes.
• Includes sales tax analytics to help track obligations.
• Supports state fees, such as the Colorado Retail Delivery Fee.

Pricing:

• Free for stores generating less than $100,000 in global sales.
• After surpassing this threshold:
  • Shopify Plus merchants pay 0.25% per order (capped at $0.99 per order).
  • Non-Plus merchants pay 0.35% per order (capped at $0.99 per order).
• Fees max out at $5,000 per year per region (up to $15,000 annually for global businesses).

Important Considerations:

• The $100,000 threshold includes all sales made through Shopify (including gift cards, in-person sales, and non-taxable products).
• Applies to sales through Shopify Payments and other gateways.
• Shopify offers a migration support team to help with the transition.
• Expected contract term: 12 months.

Option 2: Migrate to Avalara for Shopify

Key Features:

• Powered by AvaTax, a trusted tax engine used by thousands of businesses.
• Provides global tax compliance support (not just limited to select regions like Shopify Tax).
• If you’re currently using Avalara’s SST Program, it's highly likely that your best option is to migrate to the new Avalara for Shopify tool. This will allow Avalara to continue filing your SST returns free of charge.
• Avalara is offering promotional pricing for existing users migrating to the new system.

Pricing:

Avalara is offering promotional pricing for existing users of Avatax for Shopify Plus. This pricing includes unlimited transactions:

• Year 1 - $3,000
• Year 2 - $5,000
• Year 3 - $9,000

Need Help Navigating These Changes?

The upcoming Shopify tax changes will impact many Shopify Plus users. To ensure compliance and select the best solution for your business, consult a tax expert who understands ecommerce sales tax regulations.

Our team specializes in sales tax compliance for ecommerce businesses and can help you transition smoothly. Contact dannyw@sales.tax to discuss your options and keep your business compliant!