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Why Automated Taxes Only Work For Your Store's Home State (And How To Fix It)

53 threads Sep 10, 2025 Plugin → Woocommerce tax (formerly woocommerce shipping & tax)

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If you've enabled WooCommerce Tax (formerly WooCommerce Shipping & Tax) and noticed that sales tax is only being calculated for customers in your shop's home state, you're not alone. This is one of the most common questions we see about the plugin. This article explains why this happens and what your options are for resolving it.

Why This Happens: The Concept of "Nexus"

The WooCommerce Tax plugin uses a service called TaxJar to calculate sales tax. It operates on the fundamental principle of nexus. A nexus is a legal term that refers to a business's physical presence in a state. Traditionally, this meant you were only required to collect and remit sales tax in states where you had a physical location, office, employee, or warehouse.

By default, the plugin automatically sets your shop's base address (set in WooCommerce > Settings > General) as your single tax nexus. Therefore, it will only automatically calculate and charge sales tax for orders shipped to that same state. Orders shipped to any other state or country will show a tax amount of $0.00. This is not a bug; it is the plugin's intended design for simplicity.

Common Solutions and Workarounds

Depending on your business needs and tax obligations, you have a few different paths forward.

1. If You Only Need to Collect Tax in Your Home State

If your business truly only has a physical presence in one state, then the plugin is working correctly. No action is needed. The automated tax feature is designed precisely for this scenario.

2. If You Need to Manually Set Up Taxes for a Few Additional States

For more control, you can disable automated taxes and set up your rates manually. This is a good option if you only need to collect tax in a handful of specific states.

  1. Go to WooCommerce > Settings > Tax.
  2. Disable the Automated taxes option.
  3. Scroll down to the Standard rates section.
  4. Manually add tax rates for each state, county, or city where you are required to collect tax. You can find guides on setting up manual taxes in WooCommerce here.

Note: This method requires you to maintain and update the tax rates yourself if they change.

3. If You Have a "Economic Nexus" or Multiple Physical Locations

Due to recent changes in tax laws (like the South Dakota v. Wayfair Supreme Court ruling), many states now require online sellers to collect sales tax based on economic nexus (e.g., exceeding a certain amount of revenue or number of transactions in the state), even without a physical presence.

The built-in WooCommerce Tax plugin does not support multiple nexuses or economic nexus rules. For this complex scenario, the most common recommendation is to use a dedicated third-party extension that integrates with a full-featured tax service.

  • TaxJar for WooCommerce: This extension allows you to define multiple nexus addresses (both physical and economic) and will automatically calculate the correct rates for all states where you have an obligation.
  • Avalara AvaTax for WooCommerce: Another powerful alternative that handles complex multi-state and international tax calculations.

These services automatically track changing tax laws and rates, ensuring compliance without manual effort.

Key Takeaways

  • The default behavior of only taxing your home state is by design, not an error.
  • The plugin is ideal for simple use cases with a single physical location.
  • For manual control, disable automated taxes and set up standard rates.
  • For multi-state or economic nexus, a third-party solution like TaxJar or Avalara is necessary.

Always consult with a qualified tax professional to understand your specific sales tax collection obligations, as laws can be complex and vary greatly by location.

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