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We use distributors to sell sell in-person or online. What about nexus?

Full Question: Our company helps distribute products from small vendors (who also have e-commerce site and other distribution channels) through a network of direct distributors who sell directly to the end-consumer in-person or online. Let's say a vendor has a sales tax nexus in NM, my company is located in CA, and we have sellers in NV and MA. The vendor charges the end-consumer and drop-ships. We simply forward the orders to them. Do we create a nexus for the vendors in each state where we have sellers? What creates a nexus for my company? Who is responsible for collecting and paying sales taxes and in which states on orders coming from us?

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Answer:

Diane Yetter photoThe question you ask is actually a very complex question which unfortunately is dependent on many factors. The determination of what activities create nexus is very fact specific and when you are performing activities which put your company in the role of an agent of your principals, this adds significant complexity. There are a number of states that will take the position that your activities can create nexus on behalf of your principals when you are performing fulfillment activities. If the vendors that you work with don't operate on behalf of certain sellers, they may not create nexus for each seller that you do business with. In terms of who has the responsibility of collecting and paying sales tax, that will depend on who is making the sale to the end consumer and if you are not but you are shipping into states where you do not have a valid exemption certificate from the seller, then you make have a responsibility to collect tax from the seller you are working on behalf of. We would be happy to assist you with a more in-depth analysis of your situation.

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