Configuring Shopify Marketplace-Collected Taxes in the QBO Connector for Shopify

Understanding Marketplace Taxes in Shopify

Here's what you need to know:

• Shopify withholds Marketplace sales taxes directly from payouts and sends them to the appropriate tax authorities.
• These amounts are documented in Shopify’s payout reports, labeled as “Marketplace Taxes” or a similar adjustment type.
• This means these taxes collected will not be part of the payouts sent by Shopify to your bank account, and the tax liability is already addressed by Shopify.

How the QBO Connector handles Marketplace Taxes

To help your accounting stay compliant and accurate, the new QBO Connector automatically manages the accounting of the marketplace taxes:

• When a sale which involves Marketplace sales taxes is made (a sale made through Shop app), the sales tax information is imported into QBO as part of the sale or payment received transaction.
• As these are marketplace sales taxes, the QBO connector automatically identifies them and when the sales receipt is recorded, the taxes are recorded under the Sales Tax Payable Chart of Account. So, your Sales Tax Payable account balance increases.
  
   
• Later when Shopify sends a payout for these sales, it withholds these taxes. So, this adjustment will be part of the payout recorded by the QBO Connector. This adjustment will also be towards the Sales Tax Payable Chart of Account, thereby offsetting the Sales Tax Payable account balance by tax collected amount. Therefore, your Sales Tax Payable account balance should not be impacted by the marketplace taxes.
  
  For a Payout which has this marketplace tax, when you click on Review, under the Funds in the payout section, you will see an adjustment named “Tax adjustment” and this will be assigned by default to Sales Tax Payable Chart of Account (this account can be changed for every payout and the default can also be changed in the settings. So, this Chart of Account is completely configurable)
  
  
  
  
   
• This adjustment also updates the net amount of the Payout, so the Payout deposit created by the QBO Connector matches the amount received from Shopify in your bank account. The integration ensures a payout-driven approach where every adjustment for taxes gets clearly posted, leaving no ambiguity in your QBO records.

How QBO Connector accounts for merchant-liable Taxes

• Merchant-Liable Taxes: In cases where the merchant is responsible for the taxes, QBO Connector records the sales taxes under the Sales tax section of the sales receipt and these tax liabilities are accounted for in the corresponding tax agency accounts based on the location. The QBO connector automatically accounts for taxes based on the merchant or channel liability (Marketplace taxes). 

Benefits of the New Integration

1. Payout-First Reconciliation: All tax adjustments stem from Shopify’s payout data, reducing discrepancies.
2. Multi-Currency Alignment: Tax adjustments and liability tracking match the currency and location of transactions, enabling global consistency.
3. Transparent Adjustment Lines: Each withheld tax is explicitly calculated and applied as an adjustment in transaction records.