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Our equipment sales company drop ships to multiple states. Which states require more than resale certificates?

Full Question: Our equipment sales company drop ships to multiple states. Which states require more than the seller company state resale certificate? Also, if we begin leasing w/maintenance contracts and selling service agreements in multiple states what are the sales tax implications.

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Answer:

Diane Yetter photoGiven the many variables, it's difficult to respond to all of your specific questions in this forum. However - let's review some key issues regarding drop shipments... In drop ship situations where the manufacturer is registered in the consumer's state, but the distributor/retailer is not, some states (including California, Florida and Massachusetts) deem that the manufacturer is responsible for the collection and remittance of sales tax. In these situations, it is important to note that the tax basis rules can differ by state. Most states, however, provide that the sale between the manufacturer and distributor/retailer is a sale-for-resale, and thus exempt between these parties, as long as the distributor/retailer provides the manufacturer with the appropriate documentation. Valid documentation varies significantly between states. While some states, such as Kansas, Michigan, and Texas, allow the distributor's home state certificates, it is critical to know what information must be included to validate the certificate. Other states provide that alternate documenation, such as the SSTP, Multi-State Tax Commission, and/or consumer state certificates are acceptable. Some states, such as Colorado and North Carolina, will even accept an affidavit or statement of "no nexus" by the distributor. While the various combinations of acceptable documentation vary, it should be noted that Full Members of the SSTP Agreement must accept the SSTP certificate. This information (along with related drop shipment issues such as tax basis, reimbursements, and fulfillment agency nexus concerns) was confirmed as part of a recent joint drop shipment survey conducted by our organization, Yetter Consulting Services, Inc., for upcoming publication by CCH. With respect to the sales tax implications of leasing and maintenance/service agreements, there are significant factors and taxability variations amongst the states. It would not be possible to provide the data without knowing all the facts. We'd be happy to work with you on either or both issues.

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