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Dropship Exemption Certificates: The 6 "Most Restrictive" States

author photo of Michael J. Fleming

In my last post about dropshipping and exemption certificates, we ended by saying we would move on to some state specific guidelines in the next post. Today we will be looking at the first group of states I would like to cover - which I refer to as the "most restrictive". These states are the ones where, for the most part, the only documentation that can be accepted is the state specific form, and in order for that form to be valid, the issuer must be registered in the state. This group of states include: California, the District of Columbia (DC is generally considered a state for sales and use tax purposes), Maryland, Massachusetts, Mississippi and Tennessee.

A Review:

Before we move on to the state specific rules, lets review some dropshipping basics discussed in our last post. Interstate sales of tangible personal property are generally sourced to the ship to state and the obligation of a seller (supplier) to collect sales tax is based on where they (the supplier) have nexus, not where the purchaser (reseller) has nexus. Therefore, if the supplier has nexus they should either be collecting the sales tax of the ship-to state or a resale certificate in lieu of the sales tax that is acceptable to the ship-to state.

State Specifics:

Today we are going to review the six most restrictive states: those states that will generally require the issuer of a certificate to be registered in order for it to be valid. I use the term generally, because four of these six states, do allow for the consumer’s certificate to be passed through if the consumer has a valid exemption. In all other cases the issuer must be registered.

  • California - California allows for the pass-through of a consumer's certificate if the consumer has a valid exemption. In all other cases a valid CA certificate or the CA sales tax must be collected. If the tax is collected, it is based on the retail sales price to the consumer, if known, and if not, then tax is collected based on the price to the reseller plus a 10% markup.
  • District of Columbia - The District of Columbia does not allow the pass-through of a consumer's certificate. In all cases a valid DC certificate or the DC sales tax must be collected. If the tax is collected it is based on the sales price to the reseller.
  • Maryland - Maryland does not allow the pass-through of a consumer's certificate. In all cases a valid MD certificate or the MD sales tax must be collected. If the tax is collected it is based on the sales price to the reseller.
  • Massachusetts - Massachusetts allows for the pass-through of a consumer's certificate if the consumer has a valid exemption. In all other cases a valid MA certificate or the MA sales tax must be collected. If the tax is collected it is based on the retail sales price to the consumer.
  • Mississippi - Mississippi allows for the pass-through of a consumer's certificate if the consumer has a valid exemption. In all other cases a valid MS certificate or the MS sales tax must be collected. If the tax is collected it is based on the retail sales price to the reseller.
  • Tennessee - Tennessee allows for the pass-through of a consumer's certificate if the consumer has a valid exemption. In all other cases a valid TN certificate or the TN sales tax must be collected. If the tax is collected it is based on the retail sales price to the reseller.

Whether you are a supplier or a reseller it is most important to pay extra attention to these six states. Since these states are so restrictive, as a supplier you want to make sure you are collecting a valid certificate. As a reseller, if you are being charged tax by your suppliers and the dollar amount is material, you may want to explore getting registered voluntarily. This way the tax comes out of your customers pocket rather than your pocket.

BTW - If you have any questions or comments please feel free to submit below - or reach out to me directly. In the next post we will explore the requirements in Connecticut, Florida, Hawaii and Louisiana.

Do you have questions about MULTI-STATE sales tax - or other state/local tax issues?

Michael welcomes inquiries from SalesTaxSupport.com users. Please call - or (ideally) if time allows, use the "Request a Consultation" link on this FIRM PROFILE page to submit your question and/or consultation request.

Other recent “Exemption Certificate Mgmt.” posts by Michael J. Fleming:

NOTE: All blog content, comments, and participation subject to disclaimer at bottom of page.

Comments

54 Responses to Dropship Exemption Certificates: The 6 "Most Restrictive" States

  • Posted by Chris on September 14, 2017 9:03am:

    We have a customer that is located in IL and is registered in multiple states but not DC. They have a customer that they would like us to drop ship to that has a DC resale exemption. What is the statue stating that DC does not allow the pass through of a consumer's certificate? Our customer is claiming if they arrange freight they should not be charged DC tax? Is this a true statement?

    • Posted by Author photo of Michael J. Flemingmikefleming on September 16, 2017 4:01pm:

      Your customer is incorrect. The section of the code is 47-2010,Presumption of taxability. It reads as follows, "unless the vendor shall have taken from the purchaser a certificate signed by and bearing the name and address of the purchaser and the number of his registration certificate to the effect that the property or service was purchased for resale or the property or service is exempt under §47-2005, the receipts from all sales shall be deemed taxable. The certificate herein required shall be in such form as the Mayor shall prescribe and, in case no certificate is furnished or obtained prior to the time the sale is consummated, the tax shall apply to the gross receipts therefrom as if the sale were made at retail."

      • Posted by Chris on September 18, 2017 8:52am:

        Thank you Mike! This was very helpful.

  • Posted by Brenda on July 26, 2017 12:33pm:

    HI Mike,

    My company is located in MD and our customer is in VA, and is not registered in MD. They had us drop ship product to their customer located in MD. They sent us their customer's MD resale certificate, but that will not work, correct? I must charge our customer MD sales tax since they can't provide a MD resale certificate. Thank you for any assistance!

    • Posted by Author photo of Michael J. Flemingmikefleming on July 26, 2017 2:22pm:

      HI Brenda,

      You are correct. MD does not allow for the passthrough of a consumer certificate, so you would need to charge your customer the MD sales tax. If customer buys from you frequently with shipments to MD, you may want to suggest they register voluntarily so they don't have to pay the tax. They would have t collect and remit the tax at that point, but it does make sense for customers with repeated transactions like this.
      Mike

      • Posted by Brenda on August 1, 2017 8:15am:

        Thank you for your response.Please see below. My co-worker wants further clarification.

        We are a manufacture in MD, our Distributor is out of state, and our reseller is in MD who has provided a MD tax certificate. The MD Reseller is collecting tax from the MD end user (consumer). Do we also have to collect tax from the distributor or MD reseller?

        • Posted by Author photo of Michael J. Flemingmikefleming on August 1, 2017 8:22am:

          Hi Brenda,
          If your customer is the distributor and they ask you to ship to a MD address, then yes, you must charge them MD tax unless they can provide you with their own MD certificate.

          Mike

        • Posted by Author photo of Michael J. Flemingmikefleming on August 1, 2017 8:22am:

          Hi Brenda,
          If your customer is the distributor and they ask you to ship to a MD address, then yes, you must charge them MD tax unless they can provide you with their own MD certificate.

          Mike

  • Posted by Jim on July 6, 2017 11:54am:

    Mike, Regarding MS, We have a reseller who is not registered and wants to use the consumer's exemption. I called MS DOR and they indicated this could be done as long as we supplier collected the exemption letter from the consumer. But when I received the letter it clearly states in bold print that "As a prerequisite to exemption, the sale of property or charge for services must be sold directly to, billed directly to, and paid for directly by the exempt entity." So once I read this I called MS DOR again and the second agent indicated we could not accept as passthrough. Any advice on this? Don't like having conflicting advice from agents. Thanks

    • Posted by Author photo of Michael J. Flemingmikefleming on July 6, 2017 5:46pm:

      Hi Jim, That is the problem with calling states. Sometimes they get it right and sometimes they get it wrong and very often as in your case you can often get conflicting answers. That is why we always advise our clients to get it in writing, especially if the information goes in your favor.

      In this particular instance you can accept a pass through. The language you are reading is generally to prevent someone other than the exempt entity from taking advantage of the exemption. This is not the case here. In this instance the the certificate is being provided to the retailer as it should be who is turning around and "passing it through" to you.

      I have pasted the relevant section of the MS regulations below. While the whole section applies to drop shipping, your situation is covered by 35.IV.3.05.303.3.

      If you have any additional questions let us know.

      35.IV.3.05.300 Drop shipment sales into this state

      35.IV.3.05.301 A drop shipment of merchandise is a shipment from a seller directly to the retailer's Mississippi customer, at the direction of the retailer. Generally, a retailer accepts an order from an end customer, places this order with a third party seller, usually a manufacturer or wholesale distributor, and directs the third party to ship the goods directly to the end customer. This sequence of events results in two transactions: a) the sale by the primary seller (i.e. distributor) to the retailer and b) the sale from the retailer to the retailer's Mississippi customer.

      35.IV.3.05.302 If the retailer has a valid Mississippi sales tax permit, then the retailer should furnish a copy of the permit to the primary seller, rendering the first sale a non-taxable transaction. The retailer then collects sales tax on behalf of the state on the sale to its Mississippi customer.

      35.IV.3.05.303 If the retailer is not registered to do business in Mississippi and the primary seller has nexus with Mississippi the sale to the retailer is a taxable transaction by the primary seller who is responsible for remitting the tax. An exception occurs when one of the following conditions are met:

      35.IV.3.05.303.1. The Mississippi customer is a licensed dealer purchasing the property for resale through his regular course of business. The primary seller can obtain a copy of the Mississippi customer's sales tax permit and the resale exemption may flow through the retailer to the seller.

      35.IV.3.05.303.2. The Mississippi customer has a Direct Pay Permit. The Direct Pay Permit authorization may flow through the retailer to the seller.

      35.IV.3.05.303.3. The Mississippi customer is an exempt entity under the provision of the Mississippi Sales Tax Law. The Mississippi customer must furnish proof of exempt status to the seller. If proof of such exemption is not furnished, the sale is taxable.

  • Posted by Sam on June 9, 2017 11:47am:

    When it comes to CA, when a product is drop shipped to an end user and the dealer that we sold to does not have a CA exemption, what steps can we take to remove the tax? The dealer has charged the end user sales tax, but neither has a CA exemption.

    • Posted by Michael on June 9, 2017 12:00pm:

      Hi Sam,

      Unfortunately nothing. If you are registered in CA, you must either collect a certificate or you must charge the sales tax on the wholesale price plus 10%. In order for the certificate to be valid, the issuer must be registered in CA.

      Since it is generally not legal to collect sales tax without being registered, how has your customer collected the sales tax? If they are not registered then that is a totally different problem which could lead to criminal as well as civil liabilities, but it is their problem not yours.

      If they are registered then they should be able to provide you with a valid resale certificate.

      Mike

  • Posted by Kim on May 15, 2017 2:07pm:

    What do you mean by the certificate will pass through?

    • Posted by Author photo of Michael J. Flemingmikefleming on May 30, 2017 8:30am:

      In a drop ship scenario we have at least three players; a consumer, a retailer and a supplier. Some states in very limited situations will allow the retailer to provide the supplier with the consumer's certificate. In other words, the consumer's certificate can be "passed through" the retailer to the supplier. This can not be done in all states and can be used only in limited situations in the states that do allow it.

  • Posted by Kim on May 15, 2017 2:07pm:

    By pass through certificates do you mean that if the company has an exemption in Ohio it will pass through into California?

    • Posted by Author photo of Michael J. Flemingmikefleming on May 30, 2017 8:35am:

      No. That is not what is meant by a pass through. In fact the situation you describe will never work in CA.

      In CA, you must be registered to issue a valid certificate. In the rare instance where you (a retailer) are not registered in CA and your customer is registered and is purchasing for an exempt reason, the certificate can be passed through you to your vendor. A pass through will only work in a small number of scenarios.

    • Posted by Author photo of Michael J. Flemingmikefleming on May 30, 2017 8:34am:

      No. That is not what is meant by a pass through. In fact the situation you describe will never work in CA.

      In CA, you must be registered to issue a valid certificate. In the rare instance where you (a retailer) are not registered in CA and your customer is registered and is purchasing for an exempt reason, the certificate can be passed through you to your vendor. A pass through will only work in a small number of scenarios.

  • Posted by Karen on February 8, 2017 12:20pm:

    We have a supplier in California that drop-ships to our customer in the same State. We do not have a physical presence in California, but we are exempt from paying sales tax on a resale. We have been requested to provide a resale certificate. Do we have nexus in California or do we need to obtain an California permit as a non-residential State?

    • Posted by Author photo of Michael J. Flemingmikefleming on February 27, 2017 7:52am:

      Hi Karen,

      Great question! You do not have nexus in California and are not required to collect and remit sales tax. However, your supplier does have nexus in CA and is required to collect either a resale certificate acceptable to CA or the CA sales tax on your purchase price plus a 10% markup.

      In order for CA to accept a resale certificate, the certificate must have a valid CA sales/use tax permit number. Since you do not currently have a permit, you can continue to pay your supplier the tax, or you may register voluntarily with CA. By registering, you may then be able to provide your supplier with a valid CA certificate and they will not need to charge you the tax. However you will need to collect the tax from your customer and remit it to the state yourself.

      If you have few sales in CA you may want to continue paying the tax to your supplier. If you have many sales in CA it makes sense to register in CA as the cost of compliance pales in comparison to the tax being paid out of your pocket on every transaction.

      MIke

  • Posted by MICHELE on December 13, 2016 11:16am:

    We have a Tn Department of Revenue blank certificate of resale. We ordered items for resale (stone) from a company in NC. The company in NC picked the items up from Illinois and now wants us to pay sales tax on said items. Is this correct or will our certificate allow us to not pay the sales tax?

    • Posted by Author photo of Michael J. Flemingmikefleming on February 27, 2017 7:56am:

      Hi Michele,

      We don't have enough information to adequately answer your question. You do not mention where you take delivery. If you take delivery in TN then the answer would be yes. If you take delivery in another state, the answer will depend on what the state will accept as a resale certificate. Some states accept your home state certificate, while others do not.

      Mike

  • Posted by Nick on November 14, 2016 12:34pm:

    What if we are shipping components to Hong Kong, to be shipped back, and then sold as components in light fixtures? We do this currently in the US, drop shipping components to a manufacturer who assembles and drop ships finished goods to our customer.

    Right now, we are sales tax exempt in PA, MD, and MA because of exempt use certificates. Are we required to pay the sales tax if we ship to Hong Kong for assembly?

    Any help is appreciated!!! Thanks!

    • Posted by Author photo of Michael J. FlemingMike fFeming on November 14, 2016 1:34pm:

      Hi Nick, You would generally not charge any tax to the Hong Kong Company. However, if you have nexus in the state the Hong Kong seller is shipping back to, and the item is taxable, you will want to charge your customer the tax. If you have additional questions you may contact Russ Gordon at Rgordon@peisnerjohnson.com to set up a consultation.

      Mike

  • Posted by Matt on September 12, 2016 2:35pm:

    I have a company that is a reseller in KY. I have ordered material from a vendor in KY that will drop ship to TN. Our vendor is requiring a TN tax exempt form. What form do I need to fill out?

    • Posted by Author photo of Michael J. Flemingmikefleming on September 13, 2016 5:41pm:

      Hi Matt,

      TN is a state listed in the 6 most restrictive states post. The only certificate TN will accept is a TN certificate with a valid TN sales tax permit number.

      You have to be registered with the state of TN to issue this. If you have a one off sales and the dollar amount is not material, we suggest paying the tax to your vendor.

      If you plan on having regular deliveries to TN or the amount is material we suggest getting registered to collect sales tax so you can issue a valid certificate.

      If you would like to discuss further, I suggest setting up a consultation.

      If you need help registering let us know.

      Mike

  • Posted by Peg on July 11, 2016 6:55am:

    I am a seller in the State of Illinois and some of our customers ask us to drop ship to their customer in Illinois. Do we need to have a Sales Tax Exemption Certificate for the drop ship address in Illinois.

    Case in point: Say our customer GPS Intl is located in WI but is asking us to ship to Roadrunner Intl in IL. Do we need to show a Sales tax Exemption Certificate for both our customer GPS Intl in WI and one for their customer Roadrunner Intl in IL Or will the Sales Tax Exemption Certificate for GPS Intl in WI be sufficient and does it have to be an IL Sales Tax Exemption Cert.

    Thanks For your help

    • Posted by Author photo of Michael J. Flemingmikefleming on February 27, 2017 8:03am:

      Hi Peg,

      Very good questions. You will not need a certificate from roadrunner as they are not your customer. However, you will need a certificate acceptable to IL from GPS.

      IL states that they will accept numerous documents to prove resale, however they strongly advise using only the IL form with either the retailers occupation/use tax number or a resale number. The resale number is a number that companies with no taxable sales in IL can apply for. It does not have any requirement to collect tax or file returns.

      If you choose to accept any other documentation, it can be scrutinized much harder in an audit.

      Mike

  • Posted by Emily on June 21, 2016 7:29am:

    What about IL, NY, FL, and IN? Do they accept a resale cert of the resellers home state?
    Thank you!

    • Posted by Author photo of Michael J. Flemingmikefleming on June 21, 2016 8:15am:

      Hi Emily,

      Florida is covered in the subsequent post entitled, Drop Ship Exemption Certificates: Four More Restrictive States.

      NY does not allow a resale certificate from the resellers home state. You must use the NY state certificate- but you do not have to be registered to issue it.

      IL allows a vendor to accept multiple, documents, however those documents are subject to additional verification and the state strongly suggests that Vendors only accept The IL state certificate. IL has two types of registrations- one of which is for a resale certificate. It is only for those retailers who do not have nexus in IL. It does not require the collection or remittance of sales/use tax.

      Many vendors do not allow a home state certificate in IN, but you can use the IN certificate with your home state number.

      If you would like a more detailed explanation, as drop shipping and certificates can get pretty confusing very quickly, I suggest scheduling a consultation. You may request one at info@peisnerjohnson.com.

      Mike

  • Posted by Mary on April 5, 2016 12:32pm:

    We are a periodical publisher and therefore our sales are not subject to sales tax. However, our printer is now charging us sales tax on publications "drop-shipped" to post offices in the six "most restrictive" states. We do not have nexus in any of those states so we are unable to provide a resale or tax exemption certificate. Since our publication is not taxable anyway, does the printer have any responsibility to charge sales tax to us?

    • Posted by Author photo of Michael J. Flemingmikefleming on February 27, 2017 8:09am:

      Hi Mary,

      As is so often the case in sales tax, the answer is it depends. It depends on the state and it depends on what the printer is shipping. For example, while catalogs would not be sold to your customers, many states would require the printer to collect tax .

      We suggest you contact us to set up a consultation , to discuss in greater detail.

      Mike

    • Posted by Author photo of Michael J. Flemingmikefleming on February 27, 2017 8:09am:

      Hi Mary,

      As is so often the case in sales tax, the answer is it depends. It depends on the state and it depends on what the printer is shipping. For example, while catalogs would not be sold to your customers, many states would require the printer to collect tax .

      We suggest you contact us to set up a consultation , to discuss in greater detail.

      Mike

    • Posted by Author photo of Michael J. Flemingmikefleming on February 27, 2017 8:08am:

      Hi Mary,

      As is so often the case in sales tax, the answer is it depends. It depends on the state and it depends on what the printer is shipping. For example, while catalogs would not be sold to your customers, many states would require the printer to collect tax .

      We suggest you contact us to set up a consultation , to discuss in greater detail.

      Mike

  • Posted by christine on February 19, 2016 11:15am:

    We are a new company based in New York, purchasing goods from Georgia for a client in California. The goods were drop shipped from Georgia to California, never entering New York or coming into our possession. How is the sales tax handled from our end?

    • Posted by Author photo of Michael J. Flemingmikefleming on February 21, 2016 8:41am:

      On all interstate sales of TPP, the ship to state controls where the sales tax is due. This would be CA and NY has no claim on the tax. If your vendor has nexus in CA they would charge you the CA sales tax. If you are registered in CA you would provide your vendor with a CA resale certificate and charge your customer the tax which you would remit to CA.

      If you are not registered in CA you would have to pay the sales tax yourself, out of your own pocket, on your price plus 10%. This is why many retailers choose to voluntarily register in CA if they find themselves frequently paying CA sales tax.

      Resale certificates can be very tricky and even more so when a drop shipment is involved. For those of you who need to walk through some of the basics or who have specific scenarios, we offer a 1/2 hour consultation for $195 and a full hour for $350. To schedule a consultation you may email Brock Morrison at: bmorrison@peisnerjohnson.com

  • Posted by Darlene on February 4, 2016 7:03am:

    Our customer, located in KY, placed an order for conveyor components to be drop shipped to their customer in MS. Our supplier is also located in MS which means they have nexus in that state. We are a Pennsylvania company with tax exempt status for resale and do not have nexus in MS. Who is responsible for supplying a tax exempt certificate in this case?

    • Posted by Author photo of Michael J. Flemingmikefleming on February 21, 2016 8:54am:

      This is a complicated one. On all interstate sales of TPP, the ship to state controls where the sales tax is due. Since your supplier has nexus in MS, they would charge you the MS sales tax or collect a MS certificate from you in lieu of the sales tax. It does not matter if you have nexus in MS or not. The purchaser's nexus is never an issue as to where a seller has to collect tax from their customer. Since you are not registered in MS you would pay the sales tax out of your own pocket.

      Additionally, since you are not registered in MS, you can not ask your KY customer for the MS tax. If you were registered in MS, then you would ask your KY customer for the MS tax or a MS certificate in lieu of the tax. If you collected the tax you would remit that to the state of MS. Since you can only collect tax if you are registered, you would give your supplier a MS certificate. If your KY customer gave you a MS certificate, you would still provide your supplier with your MS certificate.

      In all scenarios, your supplier will be looking to you, If you are not registered in MS, unfortunately, the buck stops with you. You can not charge your customer a sales/use tax or use if you are not registered in MS. Nor can you use the KY customer's certificate.

      This is why many companies decide to voluntarily register in MS if they find them selves paying to much MS sales tax.

      Resale certificates can be very tricky and even more so when a drop shipment is involved. For those of you who need to walk through some of the basics or who have specific scenarios, we offer a 1/2 hour consultation for $195 and a full hour for $350. To schedule a consultation you may email Brock Morrison at: bmorrison@peisnerjohnson.com

  • Posted by Kara on November 11, 2015 9:22am:

    The t-shirt drop shipper I plan to use is located in California. I am in Illinois (with no nexus in any other state).

    I already have my Illinois sellers permit. I just need to know if I need to submit the Illinois Resale Certificate or the California Certificate to to Printful (my drop shipper)? On California 's Revenue site they don't say if another states is ok. They pretty much says any document can serve as Resale Certificates matter as long as it has specific criteria. So is it right to deduce that the Illinois Certificate is fine?

    To me, it makes sense, to give my states (Illinois) Certificate of Resale to my dropshipper since it will have my Illinois Seller ID; it also conveniently lists the website portal that allows one to electronically verify that one is a registered seller. For any auditing purposes that makes more sense.

    • Posted by Author photo of Michael J. Flemingmikefleming on February 21, 2016 9:27am:

      Unfortunately, you left out one very important piece of information in order for me to answer your question. Where are the T Shirts being shipped?

      On all interstate sales of TPP, the ship to state controls where the sales tax is due.

      If the t-shirts are being shipped to IL your IL certificate will do fine. If they are being shipped to CA, the IL certificate will not be acceptable. If they are going to other states, your IL certificate may or may not work.

      A lot will also depend on where your vendor has nexus. If they don't have nexus and you don't have nexus then there are no sales tax responsibilities.

      Resale certificates can be very tricky and even more so when a drop shipment is involved. For those of you who need to walk through some of the basics or who have specific scenarios, we offer a 1/2 hour consultation for $195 and a full hour for $350. To schedule a consultation you may email Brock Morrison at: bmorrison@peisnerjohnson.com

      • Posted by Kara on February 21, 2016 1:33pm:

        Thanks. Yes, they are going to be shipped all around the US.

        I ended up talking to the vendor, what they do is just charge us (the seller) an extra 10% mark-up if the item is being shipped to California (since that is where they have nexus), basically they are forcing us as the seller to pay it. So basically, I am just going to eat the tax cost of California shipments. Its not a big deal for just one state. Thats easier than with holding taxes for California and filing sales tax with Cali and my state. Thats too much extra work for just 1 state, that will only make up a small % of sales.

        • Posted by Author photo of Michael J. Flemingmikefleming on February 21, 2016 2:40pm:

          Yes - Since they have nexus in CA an dyou are not registered they will charge you sales tax on your purchase price plus 10%. If you have a start selling a lot into CA, you may wish to register voluntarily. Otherwise, you are correct in that it may just be cheaper to pay the tax.

  • Posted by Margaret on June 2, 2015 4:50am:

    We are an Oregon company M who is drop shipping an item for another Oregon company S. The material is being drop shipped to company B in Washington.
    Is company M required to collect tax from company S?

    • Posted by Author photo of Michael J. FlemingMichael J. Fleming on June 2, 2015 5:35am:

      The answer, as is so often the case with sales tax is it depends. In this case it depends on whether you, in this case company "M", has nexus in Washington or not.
      In general you will source the sale of a product to the ship to state. So in this case that would be Washington. If you have nexus in Washington, you should be collecting Washington taxes and you would collect them from "company S". In order to avoid paying the sales tax, company S would have to give you a resale certificate that is acceptable to the state of WA.
      If you do not have nexus in WA then you do not have a responsibility to collect tax from anyone.
      Let me know if that helps.
      Mike

  • Posted by Elton on April 8, 2015 5:40am:

    Good day to you. My name is Elton Clark. I am a commercial truck owner involved in interstate and intrastate transportation of goods. I have recently opened maintenance accounts for my vehicles at a facility in North Carolina and need to know what forms I need to file in order to be tax exempt(sales) in North Carolina. can you please help so that I can submit them to the vendor before my next scheduled maintenance?
    thank you

    • Posted by Author photo of Michael J. FlemingMichael J. Fleming on April 8, 2015 7:49am:

      Hi Elton,
      There are many exemptions for interstate truckers, however I do not know off the top of my head, as to which which states allow which exemptions. If you would like to contact me dirrectly my number is 972-277-4820. We can talk about getting you the correct form. However, your service provider may know exactly what form you need. I would start there as that is probally going to be the quickest way to get an answer. In addition, they are the ones who will or will not accept what you turn in, so its always good to get their input.

  • Posted by Jennifer on March 24, 2015 8:22am:

    Good Afternoon,
    I have a client that is a Washington resident and he will be purchasing a truck in Idaho and bringing it back to Washington. He should be exempt from sales tax on that truck since he’s not an Idaho resident.
    I pulled form ST-104-MV Sales Tax Exemption Certificate-Vehicle /Vessel for him to fill out. This is the correct form? If not what form does he need?
    Is there any other paperwork he needs to bring with him?
    Are there any other requirements?

    • Posted by Author photo of Michael J. FlemingMichael J. Fleming on April 8, 2015 8:02am:

      I wanted to reply to this question for two reasons. The first is to speak about use tax. While there may not be any sales tax due in the state of Idaho, there will probally be a use tax due in Washington. Use taxes are for the storage, use or consumption of a product or service in a state. They are designed to prevent the avoidance of tax for situations like the one you are describing. Many people do not realize this and I wanted to use this opportunity to point it out. If anyone has use tax questions please let me know.
      As to your specific question, I do not know the details about all documents for all types of transactions. The questions I will be able to answer off the top of my head are going to be those that are the main stream certificates. The ones most often used in dropshipping, resale and many manufacturing situations. Whenever I cam answer a question off the top of my head I will do so. However if it is a very specif question that requires some research, I invite you to reach out to me directly and we can see about getting you the correct information. My direct line is 972-277-4820.

  • Posted by Jenny on January 30, 2015 5:59am:

    What about the state of Illinois? Our research tells us since we have nexus in IL if we are drop shipping to IL the reseller has to be registered in IL. Is this not the case anymore?

    • Posted by Author photo of Michael J. FlemingMichael J. Fleming on January 30, 2015 12:23pm:

      Hi Jenny,
      You are correct that if you have nexus in IL and you are shipping to IL then you need to either collect a certificate that is acceptable to IL or the IL sales tax.
      However, IL does not necessarily mandate that you can only accept documentation from a reseller who is registered in IL; they only strongly suggest it. (86ILAC130.225(d)). In fact according to IL (86 Ill. Adm. Code 130.1405) a certificate may contain a registration number, a resale number or “a statement that the purchaser is an out-of-State purchaser who will sell only to purchasers located outside the State of Illinois.”
      The state does warn, that if you accept a certificate with a statement instead of a number, that your transaction may be open to greater scrutiny. This is why, as a best practice, many companies only accept certificates with registration or resale numbers.
      Illinois is different from other states in that it has two types of registrations; one for those who have nexus and one for those who don’t. The first requires that you collect and remit IL taxes, but the second has no requirements to do so. Since there is no obligation to collect or remit taxes, a resale registration should be painless for your customer’s to acquire and therefore painless to provide the number to you.
      If you would like to discuss further feel free call me direct at 972-277-4820.
      Mike

  • Posted by Audrey on January 26, 2015 2:37pm:

    I recently applied for a GA resale certificate. I received a response confirmation indicating that I had been issued a temporary certificate of authority for the state I have already received documentation from - NJ.
    I'm a little worried that something is very wrong here. I was on the GA tax site, so when I received the first confirmation of receipt of my application I was not worried. Now that I have received the final email, its for the wrong state. I did email the sender and indicated that I had already received my certificate of authority.
    Any suggestions? Do you think this was a scam - they charged me $125.
    Thank you for your response

    • Posted by Author photo of Michael J. FlemingMichael J. Fleming on January 30, 2015 12:30pm:

      Hi Audrey,
      I do not have enough information to comment on whether this is a scam, but it sounds at least like someone made a mistake. Have you followed up with the company who charged you $125 and what was there response? By the way here is a shameless plug- we do sales tax registrations for $100 each and follow up with the state until you are approved.
      I would like to hear an update if you have one.
      Mike

  • Posted by Amy on January 15, 2015 5:06am:

    Does anyone have a current list of:
    1. States that do not charge sales tax?
    2. States where the seller can accept the reseller's home state exemption cert. for drop shipments into other states?
    3. States where the reseller would have to provide the resale exemption certificate from the drop shippers state for the transaction to be exempt?

    • Posted by Author photo of Michael J. FlemingMichael J. Fleming on January 15, 2015 7:21am:

      Hi Amy,
      When it comes to your first question, there are five states that are generally thought of as not having a sales tax. These states are: AK, DE, MT, NH & OR. However there are caveats when it comes to AK and DE. AK does not have a state level tax, but it is a home rule state and some of the local municipalities and boroughs have sales and use taxes. DE actually has a use tax on leases of tangible personal property (TPP) that are required to be collected by the lessor if they have nexus in DE.
      Your second question will actually be included in an upcoming blog post, along with some other alternative documents that can be accepted. Here is a sneak peak of those states that will generally allow the seller to accept the home state certificate as long as the reseller does not have nexus in the ship to state: AL,AZ,AR,CO,GA,IA,KS,MI,MN,MO,NV,ND,OH,OK,RI,SC,TX,VT,WA,WV,WI & WY.
      The answer to your third question depends on where the items are being shipped. Since sales of TPP are generally sourced to the ship to state, the only time a reseller would provide a certificate in the drop shipper's state is when the items are delivered to that state. The certificate that would be acceptable to the state depends on that state. If the drop shipper is located in a state like CA, which we spoke about in the last post, then you would have to provide a CA certificate. However, there are many state where you would be able to provide alternative documentation such as the home state certificate mentioned in you second question.
      I hope I have answered your questions. Let me know if you have any followups.
      Mike

      • Posted by FREEMAN on October 2, 2015 8:45pm:

        Hey article - I loved the details . Does anyone know where my company can find a template 2005 WV DoR CST-280 example to use?

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