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We have a customer in AK (no sales tax). We ship some orders directly to AK, but for larger ones we use WA freight forwarder. What about WA tax?

Full Question: We are a NJ distributor. Our customer is in Alaska (no state sales tax). Small shipments are sent directly to customer in AK, but larger shipments we ship to a freight forwarder in WA. Should we be collecting WA state sales tax when we ship via freight forwarder? Similar situation with customers in Hawaii using freight forwarders in CA. Do we collect CA sales tax or HI sales tax when using freight forwarders if our customer has no exemption for resale, etc?

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Answer:

Diane Yetter photoWashington has an interstate sales exemption. A sale takes place in Washington when goods sold are delivered to a buyer in Washington. If delivery to a buyer takes place outside of Washington, there is no sale in Washington. Goods delivered into the stream of export if documented as being delivered by the seller into the export process also qualify for an exemption. As long as your delivery is not to your customer but rather to an agent that will deliver the goods outside of WA, you should not collect Washington sales tax when you ship via to Washington freight forwarder. If the customer arranges the freight, this could jeopardize the export/interstate delivery exemption. When shipping items to a purchaser in Hawaii using a freight forwarder in California, you would collect Hawaii sales tax if you are registered as a retailer in Hawaii to collect tax. The sale did not occur in California, and the purchaser does not take possession of the property in California. The shipment to the freight forwarder is a continuation of the interstate journey of the property sold, and is therefore exempt from California sales tax. In both cases, please ensure that the ship to address includes the name of the freight forwarder as the Ship to. If you only indicate your customer's name or if the customer takes possession of the goods and then transfers them to the freight forwarder the transaction would be taxable in the ship to state.

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