Shopify Tax charges a small percentage fee to calculate and collect sales tax on Shopify purchases. This is just a small part of sales tax compliance, while Avalara offers end-to-end support for much higher fees. Compare Avalara vs. Shopify tax to see which is a better fit.
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 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.
Before we dive into the details, here's an overview of Shopify Tax vs. Avalara:
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 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:
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 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:
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.
[inline-cta title="Let us worry about sales tax." text="The trusted solution for U.S. sales tax, VAT, and GST compliance, used by 3,000+ global businesses. " button="Get started for free" button-link="/get-started"]
Both Shopify Tax and AvaTax are effective at their core functions: accurately calculating sales tax and collecting the correct amount due.
Shopify Tax:
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.
AvaTax is also a highly accurate calculation engine, maintaining its accuracy through consistent database updates, product taxability mapping, and AI-driven product classifications, on par with the rooftop-accurate rates and automatic updates Shopify Tax delivers across 11,000+ U.S. jurisdictions.
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.
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 on its own 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.
Numeral takes a different approach. Rather than replacing Shopify Tax, Numeral works alongside Shopify’s native tax engine. Shopify merchants keep the most accurate, affordable, and platform-native calculation inside Shopify, while Numeral adds the multi-channel and multi-entity support, free nexus monitoring across all sales channels (not just Shopify), and best-in-class end-to-end compliance that Shopify Tax can’t provide on its own. Multi-channel sellers get full 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.
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 on its own 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?
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.
[inline-cta title="Let us worry about sales tax." text="The trusted solution for U.S. sales tax, VAT, and GST compliance, used by 3,000+ global businesses. " button="Get started for free" button-link="/get-started"]
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:
Avalara also excels in some areas where Shopify Tax falls short. Some of the biggest benefits of Avalara include:
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:
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:
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.
[inline-cta title="Let us worry about sales tax." text="The trusted solution for U.S. sales tax, VAT, and GST compliance, used by 3,000+ global businesses. " button="Get started for free" button-link="/get-started"]
Still not sure what's best for you? Check out some of our other comparisons:
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.
