Drop shipping transactions are increasingly commonplace in today's e-commerce world. However, they present unique sales tax compliance complexities for all parties involved. If a shipper is registered for tax purposes in the end-user customer's state, they must collect tax, unless it has the seller's resale certificate. Given these complexities and the state's audit enforcement of proper documentation in such transactions, it is increasingly important for suppliers, sellers, and even customers to understand:
- Sales tax obligations in drop shipment transactions
- Appropriate resale certificates for suppliers
- Taxable sales price activities for suppliers
- Obligations to collect and remit the tax
- Complying with states' economic nexus
To provide tax professionals with the sales tax rules for drop shipping, in view of states' differing compliance and economic nexus requirements.
- Fundamentals of Drop Shipment Transactions
- What is Drop Shipment?
- Problematic Scenarios & Issues
- Which States are Most Problematic?
- Who is Responsible for Sales Tax Compliance & On What Tax Base?
- Nexus Considerations
- Documentation Requirements--Invoices & Internal Reporting
- Ongoing Compliance Requirements
- Seller Responsibilities
- Buyer Responsibilities
- Role of Automation
- Audit Management & Audit Trail
• Recognize the parties to a drop shipping arrangement
• Identify the role variations among drop shipping parties
• Identify the advantages of drop shipping arrangements from the perspective of the online retailer
• Recognize respective drop shipping party’s responsibilities for the collection of sales tax or exemption certificates
• Identify the effect the Wayfair decision had on the economic nexus of drop shipping parties
• Identify the continuing relevance of physical presence nexus among drop shipping parties
• Identify reasonable expectations of states’ pursuit of nexus determinations in upcoming years