Handling Tax Exemption Certificates on Shopify for B2B

Many B2B customers qualify for tax exemptions. Resellers have sales tax permits. Nonprofits have exemption certificates. Government agencies don't pay sales tax. When these buyers place orders, you need to not charge tax, but you also need documentation to support those exemptions if audited.

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Shopify can apply tax-exempt settings to customers and B2B company locations, but the platform doesn't handle certificate collection or validation for you. This guide covers how to configure tax exemptions in Shopify and how to build a process for collecting and managing exemption certificates.

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What Shopify Does (and Doesn't Do)

Understanding Shopify's role helps you build the right workflow.

What Shopify Handles

• Applying tax-exempt status to customer records
• Applying tax exemptions to B2B company locations
• Not collecting tax at checkout for exempt customers
• Supporting different exemption types (resale, nonprofit, government, etc.)

What You're Responsible For

• Collecting exemption certificates from customers
• Validating that certificates are legitimate
• Storing certificates for audit purposes
• Renewing expired certificates
• Determining eligibility before applying exemptions

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Shopify marks customers as exempt. You verify they should be exempt.

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Option A: Customer-Level Tax Exemption

For individual customers (B2B or DTC), you can apply tax exemptions directly to their customer record.

How to Mark a Customer as Tax Exempt

1. Go to Customers in your Shopify admin
2. Click the customer
3. Open the ... menu, then click Manage tax settings
4. In Tax settings, choose one of the following:
   
   1. Don't collect tax: No tax charged on any orders
   2. Collect tax unless exemptions apply: Then select the relevant exemption types
5. Click Save

When to Use Customer-Level Exemptions

This approach works when:

• The exemption applies to all orders from this customer
• The customer ships to a single location
• You're working with DTC customers who qualify for exemptions

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For B2B customers with multiple locations (some exempt, some not), company location-level exemptions are more appropriate.

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Option B: Company Location-Level Exemption (Shopify Plus B2B)

If you're using B2B on Shopify Plus, you can apply tax exemptions to specific company locations. This handles situations where a company has some locations that are exempt and others that aren't.

How to Apply Location-Level Exemptions

1. Go to Customers > Companies in your Shopify admin
2. Select the company
3. Click the relevant location
4. Open the horizontal menu, then click Edit tax details
5. Enter the location's Tax ID (or VAT number for UK/EU)
6. In Tax settings, choose:
   
   1. Don't collect tax, or
   2. Collect tax unless exemptions apply, then select exemption types
7. Click Save

When to Use Location-Level Exemptions

This approach works for:

• Companies with multiple ship-to locations
• Situations where exemption status varies by state or location
• B2B accounts where some branches are exempt and others pay tax

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For example, a company might have a headquarters in a state where they're exempt (resale certificate) but a branch in another state where they haven't filed for exemption.

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Important Pricing Considerations

Tax exemptions interact with your pricing settings in ways that can surprise you.

Tax-Included Pricing

If you use tax-included pricing, marking a customer as tax-exempt may still result in them paying the full listed price. The tax is baked into your price, so removing it requires a price adjustment, not just a tax exemption.

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Consider whether tax-exempt B2B customers should see different pricing through catalogs rather than relying solely on exemption settings.

Dynamic Tax-Inclusive Pricing

If you include or exclude taxes based on customer country (common for international sales), pricing becomes dynamic. Tax might be removed from displayed prices for exempt customers, which could confuse buyers if they're used to seeing tax-inclusive amounts.

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Using fixed pricing in B2B catalogs can provide more predictable checkout experiences.

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For B2B pricing configuration, see Customer-Specific Pricing on Shopify for B2B.

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Building Your Exemption Certificate Process

Since Shopify doesn't collect or store certificates, you need a process.

Step 1: Collect Documentation

Before applying any exemption in Shopify:

• Request the exemption certificate from the customer
• Get the certificate type (resale, nonprofit, government)
• Confirm it covers the states/jurisdictions where you'll ship
• Check expiration dates

Step 2: Validate the Certificate

Verify the certificate is legitimate:

• Check that it's properly completed
• Verify the business name matches your customer
• Confirm it's not expired
• For resale certificates, consider using state verification tools

Step 3: Store the Certificate

Keep certificates accessible for audits:

• Store in your document management system
• Link to the customer record (notes, metafields, or external system)
• Track expiration dates for renewal

Step 4: Apply the Exemption in Shopify

Only after validation:

• Apply at customer level or company location level
• Select the appropriate exemption type
• Document when the exemption was applied and by whom

Step 5: Monitor Expirations

Certificates expire:

• Track expiration dates
• Request renewals before expiration
• Remove exemptions if certificates aren't renewed

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Automating Certificate Collection with Shopify Flow

Shopify Flow can help automate the intake process when combined with Shopify Forms.

What Flow Can Automate

Flow can't verify eligibility, but it can:

• Route form submissions to your team
• Send internal notifications when certificates are submitted
• Log submissions to spreadsheets for tracking
• Trigger follow-up communications

Requirements

To use this approach:

• Install the Shopify Flow app
• Install the Shopify Forms app
• Create at least one active form for certificate collection

How It Works

1. Customer submits tax exemption information through your Shopify Form
2. Form submission creates a metaobject entry
3. Flow triggers on Metaobject entry created
4. Your workflow processes the submission (email, logging, etc.)

Available Flow Templates

Shopify provides templates you can customize:

• Send internal email after form submission: Notify your team when someone submits exemption info
• Add a row to Google Sheets: Log submissions for tracking and review
• Send marketing emails after submission: Follow up with the customer

Setting Up the Automation

1. Create your tax-exempt collection form in Shopify Forms
2. In Flow, install a form processing template
3. Click the Metaobject entry created trigger
4. In Metaobject definition, select your tax-exempt form
5. Edit the template actions as needed
6. Click Turn on workflow

Note: You can use one Metaobject entry created trigger per Flow for each form.

For more Flow automation guidance, see Automating Back-office Processes with Shopify Flow.

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Creating a Tax-Exempt Collection Form

Design your form to capture the information you need.

Essential Fields

• Company name
• Contact name and email
• Exemption type (resale, nonprofit, government, other)
• States/jurisdictions covered
• Certificate number or ID
• Expiration date

Certificate Upload

Shopify Forms supports file uploads, so customers can attach their certificate directly. This simplifies collection compared to email back-and-forth.

Form Placement

Consider where to place your form:

• Link from your B2B registration page
• Include in new customer onboarding communications
• Add to your customer account area
• Reference in order confirmation for customers who haven't submitted

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Operational Checklist for B2B Tax Exemptions

Use this checklist when onboarding exempt customers.

Before Applying Exemption

• [ ] Received exemption certificate from customer
• [ ] Verified certificate is properly completed
• [ ] Confirmed certificate covers shipping jurisdictions
• [ ] Checked certificate expiration date
• [ ] Stored certificate in your records

Applying the Exemption

• [ ] Determined correct scope (customer vs. company location)
• [ ] Applied exemption settings in Shopify
• [ ] Selected appropriate exemption type
• [ ] Documented who applied and when

Ongoing Maintenance

• [ ] Tracked expiration date for renewal
• [ ] Set reminder for renewal outreach
• [ ] Have process for removing expired exemptions

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Handling Common Scenarios

New B2B Customer Requests Exemption

1. Send them your exemption certificate form
2. Review submitted certificate
3. Validate and store
4. Apply exemption to their company/location
5. Notify customer that exemption is active

Customer Claims Exemption at Checkout

If a customer mentions exemption during or after ordering:

1. Request their certificate
2. Process normally (with tax charged)
3. Once certificate received and validated, apply exemption
4. Issue refund for tax charged, or apply credit to future orders

Multi-State Company

For companies shipping to multiple states:

1. Get certificates for each state they claim exemption
2. Apply exemptions at the company location level
3. Some locations may be exempt, others may not
4. Document which states are covered

Certificate Expiration

When certificates approach expiration:

1. Contact customer requesting renewal
2. Set a grace period if appropriate
3. If not renewed, remove exemption from Shopify
4. Notify customer that tax will be charged going forward

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Third-Party Certificate Management

For higher volume or stricter compliance needs, consider dedicated tools.

What Certificate Management Apps Offer

• Automated certificate collection workflows
• Integration with state verification databases
• Expiration tracking and renewal reminders
• Audit-ready certificate storage
• Direct integration with Shopify customer records

When to Consider Third-Party Solutions

You might need more than manual processes if you:

• Have many exempt customers across multiple states
• Face strict audit requirements
• Need automated verification of certificate validity
• Want to reduce manual certificate management overhead

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Apps like Avalara, TaxJar, or specialized exemption certificate tools can integrate with Shopify for more robust management.

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Audit Preparation

Exemptions require documentation if audited.

What to Keep

For each exempt customer, maintain:

• The exemption certificate itself
• Date received and validated
• States/jurisdictions covered
• Expiration date
• Record of when exemption was applied in Shopify

Organization

Keep records organized so you can:

• Quickly retrieve any customer's certificate
• Show validation was done before exemption applied
• Demonstrate ongoing renewal tracking
• Prove exemptions were properly scoped

Regular Reviews

Periodically audit your own records:

• Are all exempt customers documented?
• Are expired certificates flagged?
• Do records match Shopify exemption settings?

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Best Practices

Verify Before Exempting

Never apply an exemption based solely on a customer's claim. Get the documentation first.

Use Appropriate Scope

Apply exemptions at the right level:

• Customer level for simple cases
• Company location level when exemption varies by ship-to address

Track Expirations

Expired certificates mean you should be charging tax. Have a system to catch expirations before they become audit issues.

Document Everything

If audited, you need to show not just the certificate, but that you validated it and applied exemptions appropriately.

Communicate Clearly

Let customers know:

• What documentation you need
• How long processing takes
• When their exemption is active
• When certificates are expiring

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For a broader look at B2B capabilities, see Essential Shopify Features for B2B.

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Tax exemptions are a standard part of B2B commerce, but they require proper documentation and process. Shopify handles the checkout mechanics once you've marked a customer or location as exempt. Your job is everything around that: collecting certificates, validating them, storing them for audits, and keeping up with renewals.

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