Dropshippers..

[Ftalgen]

Quick question to all the dropshippers out there...how do you account for sales tax? Both domestically and internationally?

[peteVA]

You do not say where you are, and that is always a consideration when sales tax is discussed.

But, in this case there is an easy answer. You are only responsible for collecting, reporting and remitting sales taxes for sales you make that are actually delivered into your state. That's it.

You definitely are not responsible for sales taxes, VAT, GST, etc. in other countries.

In the US it does not matter where the order is placed. If you are in Maryland and the order is placed from California, if the order is DELIVERED anywhere in Maryland, the buyer in CA pays the tax. Conversely, if someone in your state of MD places an order to be delivered in CA, the buyer in MD pays no sales tax.

Now, there is one wrinkle in this, but nothing major. If you are in MD and use a dropshipper in CA and you have an order to be delivered by that dropshipper in CA, the dropshipper will probably charge you CA sales tax. They should, unless you have a CA sales tax account. (I am in VA and for a few years did have that situation and did have a CA sales tax account. The paperwork is a bitch, so it got to where I would rather eat the tax than screw with CA's 4 or 5 pages and I closed the account.)

So, that's it. You have no liability for sales tax anywhere but in your home state. You are liable for anything you sell that is delivered into your state, no matter where from. If you do not collect and you are audited, you are still liable for the tax, whether you collect of not.

[RamanSidhu]

Thanks peteVA that was a lot of help for me also.

[peteVA]

It's actually why I come.

There is one exception to the above within your own state(s) and that is when selling to others for them to resell, or to other sales tax exempt entities. These really do vary from state to state. In my own state of Virginia commercial watermen are exempt for purchases directly related to their trade, airlines are exempt (home of American I think it is, bit of politics there, and all manufacturing plants are exempt - to the point that parts for a ready-mix concrete truck are taxable, but parts for the mixer riding on the truck are not.)

In any case, the person claiming to be exempt should present you with a form that you MUST keep on file and produce if you are audited and asked to prove that sales you claim as exempt are truly exempt.