Drop Shipping: Understand Your Tax Requirements

Drop Shipping: Understand Your Tax Requirements

Sponsored by Avalara

In a drop shipment relationship, there are generally three parties involved: the seller who accepts the order, the supplier who delivers it and the customer who placed the original order. Two transactions occur in this exchange, and it’s often difficult to figure out who is responsible for collecting sales tax and who is exempt.

The answer to this question depends mainly on whether the businesses involved in the transaction have nexus in the state in which the transactions occur. Nexus is generally defined as a direct or representational presence within a state. This presence requires companies to collect and remit applicable state and local sales taxes. Note that this is the general definition, as many states have different laws around what establishes nexus. If a company does business in many different states, knowing whether or not the entity is required to abide by those state’s sales tax laws quickly becomes confusing.

To make drop shipping even more challenging, when a business is exempt from paying sales tax on their purchase, the seller is required to collect a valid exemption certificate from the purchaser. They also are required to keep these certificates on file in the event of a sales tax audit, as these documents represent the missing sales tax revenue that is returned to the state, and states want all of the tax revenue they can get!

To help you figure out who is responsible for state taxes in drop shipments, we’ve put together a handy reference guide. Get yours now.

You May Also Like

What Causes Fuel Pumps to Fail?

Like most vehicle components, natural wear and tear is the unavoidable cause for parts replacement. Fuel pumps are often out of sight and out of mind for most shop visitors. That’s because they are an as-needed repair and not typically a part of ongoing maintenance. Nevertheless, if you diagnose fuel pump failure, customers will want

Like most vehicle components, natural wear and tear is the unavoidable cause for parts replacement.

Fuel pumps are often out of sight and out of mind for most shop visitors.

That’s because they are an as-needed repair and not typically a part of ongoing maintenance. Nevertheless, if you diagnose fuel pump failure, customers will want to know what caused it to go bad. You can provide additional service value to them by explaining the likely culprits.

Protecting Your Vehicle in the Winter

Depending on where you live, autumn is an idyllic time of year with bright colors and mild temperatures. If there is one downside though, it means that winter is on its way, which means frigid temperatures, snow, ice and difficult road conditions. The lifespans of cars and trucks are increasing all the time, so protecting

A Closer Look: Standard® Gasoline Direct Injection (GDI)

Gasoline direct injection (GDI) is used on most new vehicles and requires a different approach to diagnosis and service. GDI technology has been an integral part of helping to improve fuel economy while reducing emissions, and can be found on more than half of the U.S. fleet. In fact, the use of GDI engines has

Overcoming Supply Chain Issues in Today’s World

Many legislative and environmental mandates have affected the collision repair industry over the last decade. To comply with such mandates, vehicle manufacturers continue to design vehicles with increasingly advanced electronics, ranging from Advanced Driver Assistance Systems that increase safety, helping people with everything from parking to driving, to the recent push for electric vehicles. They’ve

Two Lubegards Are Better Than One

Lubegard Synthetic ATF Protectant and Instant Shudder Fixx work better, faster and longer together to stop torque-converter clutch shudder (TCC shudder). Both products are effective on their own, but when used together they not only provide a long-term solution for TCC shudder but also offer complete protection for transmissions. Since the 1980s, lockup torque convertors

Other Posts

High Oil Consumption?

A common question an OEM oil supplier like ENEOS sees is how to tell when oil consumption becomes excessive? Since a few factors could be involved, here are some of the potential implications. How much is too much?First, because of wear, vehicles are more likely to consume engine oil as they age. Common culprits that

The Value of Replacing the Water Pump and Timing Belt Simultaneously

Water pumps have long been considered the heart of a vehicle’s cooling system. Although its sole function – pumping coolant from the radiator through the engine – seems simple, it’s a crucial process to keep engines running at optimal temperatures. Unfortunately, some drivers can overlook this – along with proper care for the part. On

Fill Your Customers in About Total Vehicle Filtration

If you’ve ever wondered what one of the biggest threats to a vehicle’s engine is, the answer is microscopic particles. If these tiny specs of dirt and dust aren’t filtered properly, they will quickly accumulate inside the engine, which can cause significant damage to many parts. Worse yet, this can lead to complete engine failure.

A Closer Look: Advanced Driver Assist Systems (ADAS)

Advanced Driver Assist Systems (ADAS) Overview: Advanced Driver Assist Systems have been quite the industry buzz over the last several years. We have seen new business opportunities arise, and even a new segment of mobile technicians focusing on ADAS calibrations. While ADAS may seem relatively new, automotive service professionals have been servicing Driver Assist Systems