My client is an online retailer based in NY, using a manufacturer in California to build and ship its products.
Do we need to collect sales tax in California underneath the out-of-state threshold, or is the outside manufacturer considered nexus?
If a NY online retailer uses a CA manufacturer, do we need to collect CA state tax?
Answers
Sales tax after the Mayfair Decision has caused havoc for companies, and drop shipping is one of those issues.
The keys are:
- Who is buying
- Who is selling
- The ultimate destination of the goods/services
- The resale certificate
In your case, a NY company is selling. They are responsible for collecting Sales Tax of the State where the goods will ultimately be delivered, based on the thresholds of that State.
The manufacturer/distributor is selling to the Buyer. The Buyer is required to send to the manufacturer/distributor a properly executed NYS Resale Certificate stating it is reselling the goods/services purchased.
With a resale certificate in hand, the manufacturer/distributor is relieved of the duty to collect sales tax.
Filed Under:
Tax