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Sales tax for dropship

by kimbb
4 replies
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Hi,
If I live in New York and the dropship company is in CA. Do I need to collect sales tax if the buyer is in New York? Do I need to collect sales tax if the buyer is in CA?
#dropship #sales #tax
  • Profile picture of the author Auctiondebteliminator
    Technically no on both accounts.

    You don't have collect sales tax ever.

    But you DO have to PAY and REPORT it.

    That is what the government is really wanting. When you sell an item, you have to report and pay the sales tax.

    Some companies pass that off to the customer, some companies (like myself) pay it for the customer. It increases my conversion rates and customer satisfaction. (And in turn, increases my profits)

    But I do pay sales tax and report it. I just don't collect it extra from the end customer.

    But, get an accountant. Always.
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  • Profile picture of the author timpears
    If you don't have a sales tax permit, your vendor will need to collect sales tax from you (or pay it themselves) for any shipments to California. So in order for you to not have the responsibility for sales taxes in two states, you better get a salex tax permit in your own state.
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    Tim Pears

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    • Profile picture of the author Audarah
      You will need a sales tax id or the supplier themselves will be taxing YOU for everything that you get off of them. Its really easy to apply for one if you dont have one. I applied for mine in PA and got it by email the next day and it was free.

      As for your question- no, you dont have to CHARGE sales tax, but you do have to PAY it for customers in which your business is located. So if someone who lives in New York buys from you, then you have to pay new york for that purchase. I THINK, but I am not too sure, that New York is a bit different and may require you to tax everyone. I am NOT sure, dont mark me on my word- just check with your state taxing department and you should get your answer there. In PA, we are only required to tax those who live in PA (or pay tax on PA purchases)
      Hope this helps.
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  • Profile picture of the author dave_hermansen
    The simple answer to this question is you will have to pay sales tax for both New York and California residents. California is a state that has some pretty loose definitions of what they consider a "nexus" to be. If your supplier is in California, you are considered to have a nexus in that state, regardless of what state you are located in (or country, for that matter).

    If you really want to get into the complexities of the whole tax issue and what is and is not a nexus, one of our Store Coach members - Scott McKirahan - wrote an excellent guest post for our blog last year that really details everything about the tax issue - Sales Tax and Ecommerce – Are the Rules Changing?
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