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I am launching an ecommerce website in northern CA and have

Customer Question
partnered with several in state...
I am launching an ecommerce website in northern CA and have partnered with several in state and out of state vendors who will be drop shipping some products. Am I required to collect sales tax for those products?
Submitted: 6 years ago.Category: Tax
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Answered in 12 minutes by:
11/2/2011
Tax Professional: Robin D., Senior Tax Advisor 4 replied 6 years ago
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,870
Experience: 15years with H & R Block. Divisional leader, Instructor
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Robin D :

Hello and thank you for using Just Answer
All states are a little different in how they determine if sales tax must be collected. They most all come down to Nexus or link to the state.


Examples of items which may create a nexus in certain states include:



  • Having an employee in that state, even if your business is based in another state

  • Having a sales person (contract labor) travel to that state, even if your business is based in another state

  • Doing trade shows in that state or otherwise being in that state generating sales

  • Substantial advertising in a state

  • Having a warehouse in that state

    The drop shipments from the warehouses would be a link to that specifice state. You will need to look up each state to see if there are specifics for the items you are selling and if it only involves shipping to persons in that state.

Customer:

I understand that you need to demonstrate physical presence. So you are saying that for each state I need to research whether or not drop shippers fall into that category or not? What specifically am I looking for and where do I find that information?

Robin D :

Each state has a separate section for sales tax and most now speak specifically to inter net sales. Go to the revenue page for each state and click on Sales Tax tab.

Robin D :

Here is an example of Texas
http://www.window.state.tx.us/taxinfo/sales/

Robin D :

I sincerely XXXXX XXXXX is helpful

Customer:

I know the general tax law so it's nothing new except that I need to research this on my own by state, so it was only somewhat helpful. The part I need help with is (with New York for example) what specifically that means for me. If that does mean I need to collect sales tax from my drop shippers in New York, do I need to apply or register for a permit of sorts?

Robin D :

This link details all states and how they handle drop shipments.
http://www.ffr-dsi.com/forms/Drop%20Ship%20Requirements%20for%20Tax%20Exemption.pdf
You will see that you can give the NY supplier the sales tax exemption listing CA and then not need to collect in NY. The buyer in New York would be liable for the Use Tax.

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,870
Experience: 15years with H & R Block. Divisional leader, Instructor
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Category: Tax
Satisfied Customers: 15,870
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Experience: 15years with H & R Block. Divisional leader, Instructor

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