Avalara vs. Shopify Tax: Pricing, Features, & More
Avalara vs. Shopify Tax: Pricing, Features, & More
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.
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:
| Feature | Shopify Tax | Avalara |
|---|---|---|
| Pricing model | Free on first $100k of global sales; after $100k, 0.35% calculation fee (0.25% for Shopify Plus merchants) for orders in states where sales tax collection is enabled. | Custom quote, enterprise pricing |
| Cost cap | $0.99 per order | $5,000/region/year |
| Tax calculation | US, EU, UK | Global (US, VAT, GST) |
| Nexus monitoring | Shopify sales + imported items only | Multi-channel capable |
| Automated filing | Yes, per-return fee ($75 standard, $50 Plus) | Yes, included or separate depending on plan |
| State registration | No | $403 per state |
| Multi-channel support | No, without Numeral | Yes |
| International tax (VAT/GST) | EU and UK only | Full global support |
| Shopify integration | Built-in natively | Dedicated app via Taxes and Duties settings (all plans) |
| Free tier | Yes (under $100k/year) | No |
| Penalty guarantee | No | No |
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.
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. 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.
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. Reports indicate that Avalara pricing is high, estimated to be between $4,000 to $75,000 for most businesses.
Shopify Tax vs. Avalara tax calculation
Both Shopify Tax and AvaTax are effective at 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.
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.
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 cost per filing is $75 for the Basic, Grow, and Advanced plans and $50 for Plus plan members.
Avalara requires 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.
Shopify Tax vs. Avalara state registration
Once you establish nexus in a state, 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.
Shopify Tax does not offer registrations at all, requiring you to complete the required paperwork yourself directly with the Department of Revenue.
Avalara does offer registration and will prepare the necessary forms for an additional fee of $403 per state.
What Shopify Tax does better than Avalara
Shopify Tax has some significant benefits over Avalara, especially for those already operating within Shopify's ecosystem.
- 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.
- Free for merchants with under $100,000 in global sales.
- EU and UK support. Companies expanding into these regions can turn to Shopify Tax if they are looking for a single solution.
- Automatic updates: Tax holidays and changes within a jurisdiction are handled without manual updating required.
What Avalara does better than Shopify Tax
Avalara also excels in some areas where Shopify Tax falls short.
- Full global tax coverage: Avalara takes care of your VAT, GST, and US sales tax obligations if you're doing business in multiple countries.
- 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.
- More sophisticated product taxability rules: Avalara is better equipped to handle complex catalogs, digital good exemptions, and industry-specific rules.
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.
- Neither includes a filing penalty guarantee: Your company could bear the costs of mistakes made by Shopify Tax or Avalara.
- Shopify Tax, on its own, is Shopify-only.
- 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.
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.