Even when drop shipping is used as the method of delivery, the retailer collects sales tax from the customer, unless the transaction is exempt. If the retailer and the drop shipper do not have nexus in the state in which the sale occurs, the customer is subject to use tax.
The state's rules that must be followed and the tax that applies is the state where the goods are delivered to the customer – so the ship to state. In the United States, sales tax is imposed on the final consumer. The retailer should be able to purchase items it sells exempt from sales tax under the resale exemption.
Drop–Ship Exemption Documentation Requirements: It is important to note that
states vary in their rules regarding the exemption documentation that can be
used in order to substantiate a sale for resale in drop shipment situations. Some
states have developed alternate documentation rules. Depending on the
17 Sep 2015 … One state might declare that even a single drop shipment to a customer creates sales tax nexus for you or for the drop shipper (and thus you must collect sales tax from that customer and remit it to that state.)
6 Oct 2017 … Introduction. This bulletin explains the New York State sales tax treatment of drop
shipment sales. In a drop shipment situation, a primary seller (generally a retailer
):. accepts an order from a customer;; places the order with a third-party seller (
usually a manufacturer or wholesale distributor); and; directs the …
If M has nexus with Washington, M would owe wholesaling business and
occupation (B&O) tax on the drop shipment delivered to the Washington
customer. If S has nexus with Washington, S would owe retailing B&O tax and
would be required to collect and remit sales tax from the Washington customer. If
S's customer is …