Merchants selling on Shopify can activate Shopify Tax to calculate sales tax with rooftop accuracy and to collect tax at the point of sale. Or they can opt for a third-party compliance solution from Avalara that integrates with Shopify and calculates and collects tax.
Shopify Tax is the default for many U.S.-focused Shopify merchants because it's built into the ecommerce platform, offers affordable pricing and transparent fees, and handles tax calculations out of the box with a low learning curve.
AvaTax, offered by Avalara, is an alternative sales tax app that integrates with Shopify and other e-commerce platforms. Turning it on disables Shopify Tax. AvaTax is widely regarded for accuracy and is part of a suite of enterprise-grade products that handle end-to-end tax compliance, but at a high price point.
While AvaTax can be used as a standalone solution, most companies turn to Avalara only when they have complex needs, such as multi-channel operations, international tax obligations, or ERP integrations.
Since Avalara and Shopify Tax are both effective at sales tax collection but are vastly different products, it's important to understand what each service can do and how they differ in pricing, sales tax compliance tools, and their ability to handle complexity.
This guide explains the key differences between the two products, including pricing, features, and their pros and cons.
Shopify Tax vs. Avalara Overview
Before we dive into the details, here's an overview of Shopify Tax vs. Avalara:
Shopify Tax vs. Avalara Pricing
Shopify Tax offers straightforward pricing and is an affordable solution for small businesses. Avalara's pricing is not published, but its full suite of compliance solutions is expensive.
Here's what you should know about the cost of both options:
Shopify Tax pricing
Shopify Tax is free for stores with under $100,000 in global sales per calendar year, making it an ideal option for small merchants with simple tax situations.
After the $100,000 threshold is reached, Shopify Tax charges:
- 0.35% per order for standard plans
- 0.25% per order for Shopify Plus members
- Fees are capped at $0.99 per order, regardless of transaction amount
The total cost for Shopify Tax is also capped at $5,000 per region per year per store, so even high-volume merchants don't pay more than this amount in any single region. This cap provides predictability and is a significant benefit.
Shopify also offers add-on services for an additional fee, including automated filing priced at $75 per return for Basic, Grow, and Advanced plans and $50 per return for Shopify Plus plans.
Shopify's pricing is published online, so it is transparent and simple. There's no long-term contract required, and you don't need a sales call to understand your total fees.
Avalara pricing
Avalara does not publish pricing for any of its products online, other than the cost of license guidance or registrations. While Avalara does indicate much of its pricing is volume-based, you must get a custom quote to learn how much its services cost.
Avalara does not offer a free tier for any of its products, and AvaTax (which calculates and charges taxes) is priced separately from Returns (which handles filing) and from Registration (which registers you with states when required).
Unfortunately, reports indicate that Avalara pricing is high, estimated to be between $4,000 to $75,000 for most businesses.
For example, one Reddit user interested in integrating AvaTax with their Shopify store reported a price quote of $7,400 per year for 15,000 transactions. Mid-market merchants have also reported total costs of $8,000 to $20,000+ annually for Avalara's full suite of compliance products.
While Avalara's enterprise-tier pricing may make sense for large businesses with complex needs, Shopify merchants who just need help with U.S. sales tax collection and filings will find that Avalara is likely priced much higher than Shopify Tax.
Shopify merchants may also wish to explore other solutions, including Numeral, which is available on the Shopify app store and integrates seamlessly.
Numeral's pricing is transparent, with prices publicly available on the site. Pricing is simple with costs totaling:
- $75 per filing
- $150 per registration
Shopify merchants who want neither an enterprise contract like Avalara's nor a percentage-of-revenue model like Shopify Tax should explore Numeral's tax compliance tools, especially since Numeral requires no long-term commitment or subscriptions.
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Shopify Tax vs. Avalara tax calculation
Both Shopify Tax and AvaTax are effective at their core functions: accurately calculating sales tax and collecting the correct amount due.
Shopify Tax:
- Calculates tax in the United States, EU, and UK
- Uses precision calculation technology to collect tax based on your customer's address in more than 11,000 U.S. tax jurisdictions.
- Suggests default product categories for each of your products that you can review, revise, or approve
- Applies the most accurate tax rate for each category of product, based on local tax rules where your customer lives
Shopify Tax automatically adjusts for rate changes, jurisdiction changes, and state-specific rules, including tax holidays. You can also designate customers who are tax-exempt.
However, AvaTax goes beyond the services Shopify Tax offers and is widely considered to be one of the most accurate tax calculation engines. AvaTax achieves this accuracy through consistent database updates, product taxability mapping, and AI-driven product classifications.
AvaTax also offers support for global tax calculation, including VAT and GST in multiple countries, while Shopify Tax can only calculate and collect tax for merchants selling within the U.S., UK, and EU.
These features make AvaTax a better fit for merchants with complex product catalogs, as well as for cross-border sellers and those selling digital goods subject to jurisdiction-specific rules. But, most U.S-based merchants find few accuracy differences between AvaTax and Shopify Tax.
Avalara vs. Shopify Tax nexus tracking
Companies establish nexus by having a physical presence in a state (physical nexus) or having sufficient economic connections with a state (economic nexus).
In most states, you'll establish economic nexus once you have a certain number of transactions (such as 200) or volume of sales (such as $100,000 or more).
Your business must track nexus, but Shopify Tax makes this challenging because it only tracks nexus exposure based on sales on the Shopify platform and transactions you manually report. If you sell outside Shopify and don't import those sales, they won't be counted.
If you sell across multiple channels, including Amazon, Walmart, Etsy, or your own website, you could establish nexus without knowing it if, for example, you had $60,000 in Shopify sales and $50,000 in Amazon sales in a state with a $100k nexus threshold.
This major gap in Shopify Tax's nexus tracking service makes you vulnerable to audits, penalties, and interest, in states where you establish nexus but don't know it because so many of your sales are invisible to Shopify.
This isn't a concern with Avalara, which aggregates transaction data across multiple channels and provides a clear, complete picture of nexus exposure. However, Avalara's nexus tracking and sales tax risk assessment is a separate product from AvaTax and comes at an extra cost.
For companies interested in tracking nexus without committing to a paid plan, Numeral provides another option. Numeral offers free nexus monitoring across all sales channels, not just Shopify. Multi-channel sellers benefit from this visibility before nexus thresholds are crossed.
With Numeral, you'll know when you're approaching nexus in different states. All of your sales data is centralized in one place, and you get alerts so you can be proactive and prepared to register in new states as your company grows into new markets.
Shopify Tax vs. Avalara filing and remittance
Neither Shopify nor Avalara includes filing and remittance as a standard option with their tax calculation engine. You must opt into and pay separately for automated filing as an add-on service.
When you pay for automated filing with Shopify Tax, the service uses your store data to complete returns. The cost per filing is $75 for the Basic, Grow, and Advanced plans and $50 for Plus plan members.
Shopify Tax only includes sales placed on supported channels and marketplaces when preparing returns. Automated filing is not offered if you have imported orders, sales channels not connected to Shopify, or sell on marketplaces where you aren't the merchant of record.
This effectively precludes multi-channel sellers from using Shopify Tax to help them file and remit sales tax. Sellers who sell outside of Shopify and approved marketplaces will need to manually file their returns or use another service to do it.
Unfortunately, if a return is generated for a filing period but not submitted due to unresolved issues or other errors, you'll still have to pay for the generated filing. You must also complete your setup for each state before the filing deadline for Shopify Tax to file your returns.
Avalara doesn't have these limitations, but it does require you to pay for Avalara Returns on top of paying for AvaTax. Depending on your contact, your monthly plan may include bundled services that cover tax collection and auto-filing returns, or you may be charged separately.
Both Avalara and Shopify also leave you vulnerable to audit risk, as neither guarantees the services they provide. If a return is missed or filed incorrectly, the merchant remains liable and will be on the hook for any fees and penalties without a promise of reimbursement.
Numeral will file and remit taxes for you, and we stand behind our work with the Numeral Guarantee on every filing.
If our error causes you to file late or to owe penalties after an audit, we'll refund or pay your filing fees and cover the penalties and interest. Numeral's Guarantee provides the peace of mind that neither Avalara nor Shopify Tax can offer.
>> Read More: Does Shopify Collect & Remit Sales Tax?
Avalara vs. Shopify Tax state registration
Once you establish nexus in a state, you don't just start collecting sales tax and submitting returns. You must register with the state's revenue department first.
Unfortunately, many companies overlook this requirement or don't fully understand their registration requirements—and neither Avalara nor Shopify Tax fixes this issue because neither platform takes this compliance task off your plate.
Shopify Tax does not offer registrations at all, requiring you to complete the required paperwork yourself directly with the Department of Revenue, or to find a third-party service you can pay to complete registrations for you. This can be a major hassle.
Avalara does offer registration and will prepare the necessary forms for an additional fee of $403 per state. You can choose whether Avalara sends the completed registration directly to the state or to you for review.
Failure to register is one of the most common compliance gaps for growing Shopify brands, especially once they begin crossing nexus thresholds in multiple states. Even if your sales tax calculator is running, you have no legal authority to collect or file until you are registered.
Companies looking for an affordable way to tackle this task without doing it on their own can turn to Numeral’s state registration feature, priced at just $150 per state. This is less than half of Avalara's fee, and there are no long-term commitments or purchase requirements.
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What Shopify Tax does better than Avalara
Shopify Tax has some significant benefits over Avalara, especially for those already operating within Shopify's ecosystem. Some of the biggest benefits of Shopify Tax include the following:
- It's seamlessly built into Shopify. You just need to turn on Shopify Tax. There's no additional contract, separate vendor relationship, or integration setup.
- Transparent pricing: Prices are published online, and there is an annual cap on the cost, so there are no surprises. Your business benefits from this transparency and predictability.
- Free for merchants with under $100,000 in global sales. Early-stage stores will appreciate that they don't have to pay for tax collection support until their global sales volume grows.
- EU and UK support. Companies expanding into these regions can turn to Shopify Tax if they are looking for a single solution to manage their sales tax, VAT, and GST obligations.
- Automatic updates: Tax holidays and changes within a jurisdiction are handled manually with no manual updating required.
What Avalara does better than Shopify Tax
Avalara also excels in some areas where Shopify Tax falls short. Some of the biggest benefits of Avalara include:
- Full global tax coverage: Avalara takes care of your VAT, GST, and US sales tax obligations if you're doing business in multiple countries. If you sell internationally to countries beyond the EU and UK, Avalara would be the better choice due to its broader global support.
- Multi-channel nexus aggregation: While Shopify Tax requires manual imports to track nexus for off-platform sales, AvaTax pulls in transaction data from multiple platforms. This allows for more accurate, hands-off nexus tracking.
- More sophisticated product taxability rules: Avalara is better equipped to handle complex catalogs, digital good exemptions, and industry-specific rules.
- Established compliance infrastructure: Avalara offers enterprise compliance workflows, full audit support, and decades of tax content updates.
Where both fall short
Unfortunately, both Avalara and Shopify Tax fall short in important ways that add to your company's compliance challenges. Here are some of the biggest disadvantages of both tools:
- Automatic registration isn't part of the package: Shopify Tax won't register you at all, while Avalara can complete registration forms, but only if you opt into a separate product. You'll need to add sales tax registration to your services, and the price is high at $403 per state.
- Neither includes a filing penalty guarantee: Your company could bear the costs of mistakes made by Shopify Tax or Avalara—including filing late, missing a filing, or reporting the incorrect tax due.
- Shopify Tax is Shopify-only. If you have sales channels outside Shopify, you need another sales tax collection tool. You'll also have an incomplete nexus picture, and Shopify Tax may be unable to help with your sales tax returns.
- Avalara is priced and structured as an enterprise solution: Shopify merchants with under $5 million in revenue will likely find Avalara's costs are too high, and its complexity goes beyond what is required.
- No free nexus monitoring. Neither Avalara nor Shopify Tax offers a free option to monitor nexus. So, even before you're ready to file, you'll need an active subscription just to track when you incur tax obligations.
How Numeral compares to Shopify Tax & Avalara
Numeral offers an alternative to both Shopify Tax and Avalara, which may be a better fit for those on and off the Shopify Platform.
If your company is frustrated by Shopify Tax's limitations and has outgrown its services, but you aren't ready for the complexity and cost of Avalara, Numeral offers a practical middle ground. Trusting Numeral with tax compliance means you can take advantage of other benefits too, like:
- Easy integration: Numeral is available directly in the Shopify app, so there's no complex integration setup required.
- Free nexus monitoring plan: Numeral allows you to track nexus across all sales channels at no cost. You can see when you're approaching nexus and be proactive in getting registered so you can act before ending up with unpaid tax liabilities.
- Simple pay-per-use pricing: Numeral’s prices are on our website, and the costs are affordable. Filings are $75 and registrations are $150, and there are no monthly subscriptions required. We also don't collect a percentage of revenue or require you to commit to an annual contract.
- Numeral Guarantee: When Numeral makes an error, we'll cover penalties and fees from an audit or late filing.
- End-to-end support. Numeral handles the full compliance workflow. We monitor for nexus, register you in states where you establish it, automate filing and remittance, and even provide a virtual mailbox so states can send notices to us and we can act.
These benefits make Numeral an ideal fit for Shopify merchants who've crossed or are approaching nexus thresholds in multiple states, who sell across multiple channels, or who want sales tax obligations, including filing, off their plate without building a full compliance operation.
Book a demo with Numeral to find out more about what we can do for you if you want more support than Shopify Tax can provide and are looking for a more modern, affordable solution than Avalara can offer.
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