Sales tax implications of drop shipping
INSIGHT ARTICLE |
Sales tax seems simple, until it is not. Take drop shipping, for example. A seller of tangible personal property accepts an order from a customer and places that order with a third party (wholesaler or manufacturer) that then delivers the property directly to the customer. The seller made the sale, but never touched the property. Which party is responsible for collecting and remitting the sales tax? Add in nexus—and the resulting discussions on where the product is sourced, sold and delivered—and it's clear to see why drop shipping can create some serious sales tax headaches.
In this article, Avalara sheds some light on the sales tax implications of drop shipping by answering four key questions that can help taxpayers determine when and where sales tax is owed and whether or not a reseller certificate should be submitted:
- In a drop ship scenario, when is there a sales or use tax obligation?
- Do states consider drop shipping a nexus-creating activity?
- What constitutes a valid resale certificate?
- How can drop shippers, retailers, wholesalers and manufacturers get drop shipping related sales tax right?
Download Avalara's "Sales tax implications of drop shipping."
© Avalara. Reprinted with permission. RSM disclaimers of warranty.