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Our corporate office is in Maine but our warehouse is in MO. Product is received at warehouse or drop-shipped to customer. If we drop ship, are we subject to sales tax?

Full Question: Our corporate location is in Maine where we have a Resale Certificate, but our warehouse is in Missouri. We order from our Corporate location for shipments to our warehouse or as drop ship direct to customers. If we drop ship a product from the vendor to the customer (say Florida), are we subject to sales tax and which state?

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Answer:

Diane Yetter photoSales tax applies to the state where the customer takes delivery of the product purchased. In a drop shipment transaction, the purchase by the wholesaler/seller (your company), the sale in concept is a purchase for resale. However, 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 (ME 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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