How to Set Up Shopify Payments and Taxes

It is obvious that to make money on any eCommerce platform you would need a proper payment system to receive payments. To use Shopify, firstly buy a plan according to your business, as soon as your Shopify website is ready to launch, the next important decision is to set up a Shopify payments account to accept payments as well as managing taxes. This may sound boring but trust me it is indispensable and requires immediate attention.

Let me help you through this blog with this whole process without any technology jargons or confusing settings, in a simpler, clean, and easier guide line to prepare Shopify payments and configure taxes how they are supposed to.

Step 1: Turn On Shopify Payments

The first and easiest way is to activate the built in feature of the platform is the Shopify payments method. This requires you to set up a Shopify account with no third parties, no plugins, and no switching back and forth between platforms in addition to no extra costs. This step allows you to receive payments directly into your bank accounts.

Here’s how to set up Shopify:

1. Open your Shopify Admin
2. Access your account on Shopify dashboard.
3. From the left menu on the bottom left corner, click on Settings.
4. Click Payments.

Choose Shopify Payments:

If Shopify Payments is available in your country as most major countries support it, you’ll see it at the top. Click Complete Account Setup.

Now it’ll ask for a few details:

• User Information: Your name, Date of birth, and last 4 digits of your ID.
• Business Information: Individual or registered business.
• Business address: Where your business is located.
• Banking information: You account where your funds will be credited.

Please fill out these fields with complete honesty and care to avoid any wrong information being submitted. Shopify also verifies this information to comply with financial regulations, so everything needs to match your documents. Once submitted, your account will go under a quick review, and that would be it, your Shopify Payments will be activated.

Step 2: Add Other Payment Options

Even though Shopify Payments covers credit/debit cards, you might want to offer other Payment methods like:

• PayPal
• Apple Pay / Google Pay
• Cash on Delivery
• Manual Bank Transfers (especially useful for Pakistani or regional customers)

To add these:

1. Go to Settings > Payments.
2. Scroll down to the Alternative payment methods or Manual payments sections.
3. Click Add and follow the steps to enable what suits your customers’ best.

Offering more than one payment method reduces cart abandonment as people love variety.

Step 3: Test Your Payments

Before going live, make sure everything works. Shopify lets you run test orders so you don’t accidentally charge real money.

To test payments:

• In Settings > Payments, scroll to Shopify Payments and click Manage.
• Enable Test Mode.
• Now go to your store, add a product to cart, and place a test order using one of Shopify’s test credit card numbers which they give you in the same section.

Once you’re confident everything’s smooth, go back and disable Test Mode to start accepting real payments.

Step 4: Configure Your Tax Settings

Alright, let’s talk about taxes. I know this part can be a little intimidating, especially if you’re not a finance person but don’t worry I’ll break it down. Shopify has a pretty smart tax system that calculates taxes automatically based on your location and your customers’ location, nevertheless it still needs your input to make sure everything is correct.

Start by going to Settings > Taxes and duties. You’ll see a few sections here depending on where your business is based.

Set Your Tax Regions

For instance:

• If you’re in the US, Shopify will ask for your state and whether you have a sales tax obligation there.
• If you’re in Canada, it will set GST/HST/PST depending on the province.
• For the EU, you’ll deal with VAT.
• If you’re in other non-supported regions, you can choose to include or exclude taxes in your pricing manually.

Click set up next to the country/region where you sell. Then:

• Make sure you are charging taxes as required in your country.
• If you have a tax identification or registration number, enter it here.
• However leave this field blank if you are not registered yet.
• Just enable tax collection.

In case of confusion where you are not sure whether you are required to register for taxes or not, you would require a local accountant or tax advisor as Shopify does not have this feature as of yet.

Step 5: Customize Tax Settings for Each Product

Shopify is set on a default setting of charging taxes on all physical products. So if you are selling any sort of service, digital product or a tax-exempt item, you would be expected to customize your setup according to your business needs.

Here’s what to do:

• Go to Products in your admin panel.
• Click on a Product.
• Scroll to the Pricing section.
• Check or uncheck the box for Charge tax on this product.

In case of no selection, the product will not have any tax added to it during checkout.

Step 6: Choose Whether Your Prices Already Include Taxes.

One of the most common unclear and confusing stage is to pick tax inclusive or exclusive pricings. It totally varies based on your location of transactions, such as:

• In the US and Canada, prices are usually shown without tax.
• In the EU or UK, prices are typically shown including VAT.

To adjust this:

1.     Go to Settings > Taxes and duties.

2.     Under Tax calculations, you’ll see an option:

“All prices include tax”

Depending on your business preference or your location you can activate it or deactivate it, whenever you like.

Step 7: Add a Note about Tax Charges

Even though Shopify does tax calculations, adding a small note at checkout is a smart option, like:

“All prices are tax inclusive”,

“Applicable taxes calculated at checkout.”

Or

“Prices include VAT where applicable.”

It can help avoid confusion or customer complaints later. You can add this to your Checkout Settings > Checkout Language, or use your theme’s footer to mention it.

Step 8: Review Your Payments and Tax Reports

As soon as you start making sales, Shopify provides you with easy-to-read reports to follow:

• Payouts (from Shopify Payments)
• Pending balance
• Fees
• Collected taxes

To view payouts:

Go to Settings > Payments > View payouts.

For tax reports:

Go to Analytics > Reports > Taxes.

These summarized analysis help you to review your store’s performance and when filing for taxes.

Final Thoughts

Getting things ready for your Shopify payments and taxes may be a boring task of launching your eCommerce store, even so it is a key process that needs to be established right away. Just set it up perfectly from the start and save yourself hours of hassle and confusions later on.

Moreover, if you’re ever stuck, Shopify has country-specific guides to help you navigate. You need to keep an Eye on Legal Changes and subscribe to updates from local authorities as tax laws change, especially for online businesses. Nonetheless Shopify helps you collect taxes, but it’s still your responsibility to file them correctly.

And once it’s done? You’re ready to make money and keep it.

Happy selling!