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I am starting an e-commerce website out of a home office and will drop-ship all product. Do I need to get a Sales & Use or Reseller license?

Full Question: I am starting an e-commerce website and will not maintain any brick and mortar location, no stock, and zero products at my location (I operate out of a home office or sometimes Starbucks or anywhere I can take my laptop). I am using 100% drop shipping from wholesalers, so no product ever in my possession. I'm assuming the answer is "yes", but do I need to get a Sales & Use or Reseller license in Maryland if a customer who also lives in Maryland happens to buy from me?

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Answer:

Diane Yetter photoSales tax applies to the state where the customer takes delivery of the product purchased. If the seller has physical presence in the customer's state of delivery, they are required to register and collect sales tax on any taxable sales into these states. Once you have a MD sales tax registration number you will be able to provide a MD resale certificate to your suppliers to avoid paying sales tax on your purchases that they drop ship to your MD customers. You should also be aware that if the manufacturer/shipper is registered in the ship to state, the wholesaler must be able to present appropriate documentation for the resale in the delivery state. Many states accept alternate documentation such as the wholesaler's home state (MD in your case) resale number. In some cases such as FL, the answer could change depending on where the goods originate. Therefore, if the manufacturer/shipper is registered to collect sales tax in the ship to state and they drop ship goods on your behalf to customers in a registered state, they can only avoid charging you the delivery state sales tax if you can provide a valid resale certificate acceptable in that state. Absent this documentation they will charge you sales tax on their selling price or in some cases the retail price or in the case of CA, your selling price plus 10% assumed markup if they don't know your retail selling price. If you do register in order to provide a resale certificate in states that require a registration number in their state to issue a certificate, you are required to collect sales tax on the sales to customers in those state on your selling price to them.

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