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Our Canadian company sells to US states. We shipped to client in WY with invoice to TX. If we need to charge tax, do we base on ship-to or bill-to?

Full Question: We are a Canadian corporation. From our Canadian head office we resell to US clients in different states gas analysis equipment manufactured in Finland by our mother company. We have recently shipped equipment to our client in Gillette Wyoming, our invoicing to be sent to Texas. We do have a representative soliciting business for us in Wyoming. Q1: Assuming we have to include State Sales Tax to our invoice, what is the general rule that applies in the US relative to which sales tax that must be invoiced. Is it the sales tax of the state where the shipment is made or the tax where the invoice is going ? Q2:As a foreign corporation do we need to include the State Sales Tax on our invoice? If yes should it be Wyoming or Texas ? What is the rate that applies?

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Answer:

Diane Yetter photoIn the US, sales tax is due for the state where the property is delivered and used and consumed. As the seller, this would be the state where you ship the goods. In your example, you have shipped the goods to WY so this is the state you look to in order to determine if you have nexus and then if so, if the item you are selling is taxable. The state where you send the invoice is generally not relevant in making a sales tax determination. Since you have a representative working for you in WY, you have likely established nexus in WY and therefore are required to register and collect sales tax on all taxable sales. Assuming you are registered, you should separately state the WY sales tax on the invoice to the customer. The rate for Gillette, WY is 5% currently. If the customer claims an exemption on the item purchased, you should receive a WY exemption certificate from them to substantiate the fact that you didn't charge them tax.Most states consider separate charges that are mandatory such as fuel surcharges to be handling charges and even if delivery charges are exempt, handling charges are usually exempt. The recovery of your overhead costs as a separate statement on your customer invoice does not impact the taxability. Sales price includes all costs necessary to make the sale and includes overhead costs. Therefore, most state does impose sales tax on separately stated mandatory service charges as long as the associated item is taxable.

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