State Sales Tax on Drop Shipments: Navigating Various States' Rules on Registrations and Exemptions

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, May 31, 2023

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Course Materials

This course will prepare tax specialists to handle the full range of potential sales and use tax issues involved in drop shipments, whether as vendors, shippers, or customers. The panelist will provide an integrated approach to compliance, documentation, and tax planning in this evolving and complex area of tax.

Description

Using drop shippers, i.e., a manufacturer or distributor, to fulfill customer orders presents one of the most difficult compliance challenges in sales and use tax. If a shipper is registered for tax purposes in the destination state, it must collect tax unless it has the seller's resale certificate.

If the destination state is among those that don't accept other states' certificates, a nasty spat over tax could ensue between a seller and drop shipper. What is the taxable sales price in that case? What documentation is required--for you and your customer?

Constant awareness of different states' taxation policies toward drop shipping--and fine-tuning of your company's tax planning in this area--is critical to keep a tax staff's management of the process under control.

Listen as Michael T. (Mike) Dillon, President at Dillon Tax Consulting, clarifies the confusion regarding sales tax treatment of drop shipments. The webinar will provide a framework to manage the associated tax research, compliance, and planning aspects more effectively.

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Outline

  1. Fundamental drop shipping concepts
  2. Problematic scenarios and issues to anticipate
    1. Nexus: What are the potential sales and income nexus traps for parties involved in a drop shipment transaction?
    2. Documentation
  3. Ongoing compliance demands with drop shipping
  4. States that pose particular issues

Benefits

The panelist will review these and other key topics:

  • What are the larger states' particular rules on drop shipping and sales tax? What is the tenor of audits in those states that don't automatically accept another state's resale certificate?
  • What gets taxed if a resale certificate is not accepted: the price the seller charges to the customer or the price the drop shipper charges to the seller?
  • What style and level of documentation are prudent, both for the customer invoice and internal recordkeeping at the seller or drop shipper?
  • What are the potential sales and income nexus traps for parties involved in a drop shipment transaction?

Faculty

Dillon, Michael
Michael T. (Mike) Dillon
President
Dillon Tax Consulting

Mr. Dillon is an attorney specializing in multistate sales and use tax matters for multistate and multinational...  |  Read More

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