Drop-Shipping

Q: LATELY, OUR COMPANY HAS BEEN RECEIVING SALES ORDERS FROM COMPANIES OVERSEAS AND ASKING US TO DROP-SHIP TO A CUSTOMER IN A STATE WE HAVE NEXUS IN. OUR CUSTOMER SAYS THEY SHOULDN'T BE CHARGED TAX. ARE THEY CORRECT?

A: Unless your customer has a specific exemption, you must collect either the tax or a certificate in lieu of the tax acceptable to the state where an item is delivered. You do not have an option. It does not matter where your customer is located. A customer is never asked where they have nexus when determining what state’s rate to charge. This is no different just because your customer is foreign. However, there are 36 states where your customer can provide some form of alternative resale documentation without having to get registered. This will prevent you from having to charge the tax. However, in some states, your customer will need to be registered in the state in order to provide a valid certificate. We have a chart available in the premium portion of our website that identifies the different forms of alternative documentation customers with nexus may use for each state.