Tax Compliance
What is Tax Compliance?
Tax Compliance automatically handles interstate or different countries tax law requirements when customers change their shipping address to a different state.
This is particularly valuable for US merchants who need to comply with varying state Nexus tax rates.
How Tax Recalculation Works
Order Editing uses Avalara's tax compliance software to accurately recalculate taxes when addresses change. This ensures your store remains compliant with current state tax laws and rates.
Why This Matters for merchants selling in the US
Different states have different tax rates and rules. When a customer changes their shipping address from one state to another, the tax amount may need to be adjusted to comply with state tax laws.
Example scenario:
Customer accidentally enters a Texas shipping address at checkout
After purchase, they realize the mistake and want to change it to Florida
Texas and Florida have different tax rates
Tax Compliance determines what happens next
Tax Compliance Options
You have four options for handling address changes that affect tax amounts:
Option 1: Shopify Default (Allow All Edits)
Allows all address edits regardless of tax changes. No automatic tax adjustments are made.
Option 2: Disallow Edits
Prevents customers from changing their address if it would result in a different tax amount.
Option 3: Allow Edit if Customer Pays Difference
Allows address changes only if the new tax amount is higher and the customer agrees to pay the difference. If the new tax is lower, the edit may be blocked.
Option 4: Allow All Edits with Tax Refunds and Collection (Recommended)
Automatically adjusts tax amounts. Promoting the collection of additional tax if needed or refunding tax if the new rate is lower. This is the most flexible and customer-friendly option.
Recommended Setting
We recommend "Allow edits with tax refunds and collection" for most merchants shipping within the United States.
Why this is a major benefit:
Provides the best customer experience by allowing address corrections
Automatically ensures tax compliance across all states
Handles both tax increases and decreases seamlessly
This capability is a unique selling point of Order Editing
Customer Experience:
When a customer updates their address post-purchase and triggers a change in their tax, Order Editing will either prompt the customer to pay the additional funds or will refund the difference. Both scenarios will remain in the same order and be reflected in the Order Timeline.
How to Configure Tax Compliance
Navigate to Settings > Tax Compliance
Select your preferred option:
Click Save
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