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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7712
Experience:  15years with H & R Block. Divisional leader, Instructor
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Sales Tax Fulfillment

Resolved Question:

Hello I hope you are well.  I am based in the UK and I am going to shortly be using a fulfillment agent to sell our goods in the USA through a website / ebay etc. As I understand it I will have to pay American Sales Tax on orders received in the State in which the fulfillment house is based but I am not sure. I am not sure because I do not own the fulfillment house and all the sales money collected will be coming to us here in the UK. I also understand that i would not pay tax if I shipped it to a state outside of the state i am based- is that correct? many thanks
Submitted: 3 years ago.
Category: Tax
Expert:  Robin D. replied 3 years ago.

Robin D :

Hello and thank you for using Just Answer.
The shipper should be collecting sales tax from the buyer. If you do not own the shipper then you are the buyer and you will pay sales tax to the supplier for your purchases from them. Whether the order is placed over the Internet or through traditional means, if a company has nexus with the state in which the product is being shipped, sales tax should be billed and collected. For example, if a Pennsylvania company ships to Pennsylvania, there is nexus, and tax is collected. If the Pennsylvania company ships out of Pennsylvania, whether they collect sales tax or not depends on whether or not they have nexus with the state into which they are shipping.
You and your business would have no nexus in PA but the shipper does so unless you are registered with PA and produce an exemption to the supplier, you will pay the sales tax on all items that you or your company buys from the supplier in PA.
If the supplier collects sales tax from you then you can pass that along to the purchaser but not as a sales tax because you and your company must register to collect sales tax and then remit that amount to the state. There is no sales tax obligation for your company if you have not established nexus. You can voluntarily register to collect and remit tax. But, you must register with the state prior to collecting the tax.

Customer:

Hello Robin,We are looking to operate in the US from our UK Corporation. We shall use a fulfillment house in Pennsylvania who will store and ship our goods when we tell them too. The orders will come via our American website and American Telephone number diverted to our UK phone line. We will have no operations in the US as such apart from the fulfillment house working on our behalf.

Customer:

I hope this makes sense as we shall not be buying anything from the USA- we will be delivering a container load of goods to Pennsylvania (which we will pay duties on) and they will then ship them out on our behalf?

Robin D :

Then you need to register in Pennsylvania as doing business in that state. The sales tax will be collected for the state by you from all sales made from PA that are not exempt.
The sales and use tax is imposed on the retail sale, consumption, rental or use of tangible personal property in Pennsylvania. The tax is also imposed on certain services relating to such property and on the charge for specific business services. Major items exempt from the tax include food (not ready-to-eat); candy and gum; most clothing; textbooks; computer services; pharmaceutical drugs; sales for resale; and residential heating fuels such as oil, electricity, gas, coal and firewood.
If your product is one of the above that is exempt then you will still need to register. Look at this booklet link that will explain what your company is responsible to on your business activity in PA

Retailers' Information Guide (REV-717)

Customer:

Thanks, XXXXX XXXXX first question I also asked If i would not pay tax if I shipped it to a state outside of the state i am based- is that correct?

Robin D :

That is correct. The receiver of the product will need to pay any Use tax to their own state if applicable.

Customer:

Thats great Robin. Thanks for your help. One last Q if you don't mind-Is a fulfillment house classed as a nexus so therefore i have to pay sales tax in Pennsylvania where they are based?

Robin D :

It is like a warehouse situation. Since you are sending the items to the location in PA and not using a supplier in the state as a drop shipper then that designates Nexus. The products are yours so you are basically warehousing the items and then shipping from that location.

Robin D :

You are not really paying the sales tax, your company needs to collect it and then send it on to the state. You will need to make sure that on E-bay you charge the sales tax for the sales in PA.

Customer:

I was planning on just charging everyone the same amount regardless of whether they have to pay the sales tax and swallow the PA tax for the PA orders- would that be okay?

Robin D :

Yes you can but that is an expense that you are not responsible for plus you will need to keep very good shipping records for the state so you are not charged on total sales.

Customer:

So i must keep a record of everything that i ship- correct or other wise they will want to tax that too?

Robin D :

That is correct. The state could come in and say that you need to pay on total sales so it is MAJORLY important to keep records of sales.

Robin D :

Get a good accountant in PA to assist with the sales tax issues. The shipper probably knows one.

Customer:

Excellent thanks very much.

Robin D :

You are welcome and good Ebaying!

Customer:

Thanks, XXXXX XXXXX Over and out!

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7712
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and 4 other Tax Specialists are ready to help you

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Robin D.
Robin D.
Tax Professional
7712 Satisfied Customers
15years with H & R Block. Divisional leader, Instructor