Sales Tax Requirements for Drop Shipping Arrangements
Posted by Mark Stack on July 31, 2024
Drop shipments occur when a retailer takes an order and directs a wholesaler to ship the product directly to the customer. The wholesaler invoices the retailer, who in turn invoices the customer. When the wholesaler is registered to collect sales and use taxes in the purchaser's state, they may be required to collect these taxes from either the customer or the retailer. However, depending on the facts and circumstances, such as location and nexus status for all parties involved, how property is delivered, and how the title to property passes, the responsibility and requirement to charge and collect sales tax can change.
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Mark is responsible for tax compliance services to businesses and individuals, with specialized knowledge related to international taxation as well as state and local tax (SALT), including nexus and multistate consulting, reviews, and compliance.