once more dropship and tax calculation

[ajainy]

I am starting on new store.
For this, i am planning to use dropship companies.

My business is based NJ, so i am sure, for ordes "shipped", i need to pay sales tax. But my dropshipper told me, he will charge me sales tax for NY too. (as his warehouse in NY)

1. So how I approach about this? shall i charge tax for two states now, from customers.

2. can i avoid NY tax, if i am able to give reseller form to dropship companies.

thanks
ashish

[roban]

I drop ship and only charge sales tax to NY customers as I am based in NY. My suppliers don't charge me tax but they are all over the country. I think your drop shipper is wrong in charging tax for NY. The sale is made in NJ so that's the only tax you should have to be concerned about. I'm not an accountant but that's my take on it.

I would avoid the extra paperwork with the reseller form if at all possible. If you must charge the sales tax for NY as well build it into the cost of the item as a surcharge if your cart allows it. I know mine does.

[ajainy]

Thanks roban for reply.
I think, it has to do with state laws. If particular item being shipped from warehouse in that state, they will hav to charge tax.

I added NY tax too in my shopping cart for time being.

Now interesting thing is, i will charge tax on retail price and warehouse will charge on wholesale price. So i end up charging more. Where that money goes? obviously it's not mine.

So i personally think, my warehouse shouldn't charge tax to me. If he needs to by law, then he and me should be able to use 'reseller' certificate route to avoid it.

I guess, i will have to talk to them again.

thanks
ashish
http://www.fragranceocean.com

[isharli]

I have not heard that it is law that you must charge sales tax in the state that the warehouse is located. Our accountant is happy with us charging it for sales in our home state (MA), not the state that the warehouse is located in (CT).

[TipPro]

Ashish is correct that there is a law that retailers must charge sales tax in any state that it operates a warehouse/store. So for example Target has stores in most states and charges sales tax to most online sales orders. Amazon on the other hand only operates its business in a couple of states and only charges tax for those states.

I also agree with Roban that your supplier should not be charging you tax. Only merchandise that is sold to the end user should be taxed. Since you are not the end user you should not have to pay tax. For example, when Dell sells computers to a business that resells computers, Dell will not charge tax. If the same business buys computers from Dell again but decides to use the computers themselves in their sales department, Dell will charge tax since that business became the end user.

[opensourceforce]

CA has their own rule on taxing wholesale to reseller orders...FYI so if you have a supplier in CA that will need to be taken into account.

[nodell25]

I would reccomend looking into a Sales Tax Management Service for helping you calculate and collect sales tax for your ecommerce business. Many states have there own laws on how they collect sales tax. The service that I use is called AvaTax from Avalara (www.avalara.com). They have an SDK that integrates right into shopping cart. It is a pretty cool service. Hope this helps with your problems.

[JEccles]

Have you applied for and provided your supplier with a Federal EIN number? If you have, they should bot be charging you tax.