Everything You Need to Know About Sales Tax for Dropshipping

Are you a drop shipper trying to figure out the complexities of sales tax? Sales tax for online businesses is already a pain in the neck and it can be hard to know who collects and who pays sales tax when drop shipping is involved.
In this video, Kexin answers the most common questions about sales tax when drop shipping:
👉 Who are the three parties involved for sales tax purposes?
👉 What creates sales tax nexus for the seller and drop shipper?
👉 Who collects and who pays?
👉 How do you get a resale certificate?
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For more information about how to get a resale certificate, watch "How to Fill Out the SST & MTC Exemption Certificate Forms":
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• Everything You Need to...
#salestaxfordropshippers #everythingyouneedtoknowaboutsalestaxfordropshippers #ledgergurus

[@LedgerGurus]

Thanks for watching. If you need help with your sales tax, click here to learn about our services - ledgergurus.com/services/sales-tax/ OR download our complete guide to sales tax compliance: ledgergurus.com/portfolio/10-steps-to-ensure-sales-tax-doesnt-burn-down-your-ecommerce-business/

[@mjamaltv]

This has to be one of the best explanations about not only sales tax but physical and economic nexus! OMG thank you so much!

[@LedgerGurus]

Yay! We're so glad we could help you! Thanks for letting us know. :)

[@alijawed1234]

Great work! Keep up the good work.

[@abald5514]

very helpful thank you so much!

[@dngrelaxingmode]

you were fantastic, understood every concept, Thank you

[@LedgerGurus]

We are so glad!

[@DesignandMotion]

Thank you so much for all your videos on taxes. They are very thorough, and you do a great job explaining all the different scenarios.

[@LedgerGurus]

Thank you. We're glad to help.

[@mercedesgramirez1719]

This is a great explanation!! Thank you!! 🤩🤩

[@LedgerGurus]

Glad it was helpful!

[@victorcastillo8461]

I really love the video!!!! Thank you!!!

[@LedgerGurus]

Glad to help!

[@45JTC]

Thank you. This was extremely helpful!

[@LedgerGurus]

You're very welcome! Glad it was helpful.

[@tinarising8617]

This was a very informative video that helped me understand sales tax relationships between dropshippers, retailers, and customers. Thanks so much!

[@LedgerGurus]

I'm so happy that it helped you.

[@beingshivangii]

Your explanation is so accurate and to the point . Thankyou so much! ❤

[@LedgerGurus]

You're so welcome!

[@user-ui4fy7fi7i]

Very helpful and informative video, thank you so much.

[@LedgerGurus]

Glad it was helpful!

[@lorearco4013]

Amazing explanation!!! Thanks !! 🤗🤗🤗🤗

[@LedgerGurus]

Glad it was helpful!

[@riddleburger]

Very informative! Thanks a lot

[@LedgerGurus]

Glad it was helpful!

[@HerkimerDiamondDetective]

Just started out to sell my product and watched two videos. Good stuff! Great teacher!

[@LedgerGurus]

Glad it was helpful!

[@andrejczeto8721]

I am very grateful

[@LedgerGurus]

We're glad to help!

[@ashleyprj2487]

Great videos - you explain very well/analytical!! Wish you operated here in Canada as well!

[@LedgerGurus]

Thank you!

[@idaroll9045]

wow! I have watched a lot of youtube videos! I undertood you at first time!! Thank you so very much :-D

[@LedgerGurus]

So glad!

[@truckingwithlofigirl]

Ok, thank you. Yes, I need to register for the permit, that’s what I was trying to think of; which I will do tomorrow morning. Thank you for the information about the reseller certificate, now I know to get one of those too for some products I want to drop ship.

[@LedgerGurus]

Best of luck!

[@devinacosta6307]

KEEP IT UP!!!!

[@LedgerGurus]

Thank you!

[@anthonyknight1746]

please do more on Nexus and industry types. subscribed

[@LedgerGurus]

Thanks for subscribing. What industries are you referring to?

[@Luis-ph4gy]

Hello, Thanks for your video. It was very clear. I kind of document businesses from Delaware can give to the supplier to be exempt from sales taxes. Since Delaware doesn't have a resale certificate.

[@LedgerGurus]

You can use the SST or the MTC form! On those forms you can use your home state ID or FEIN. We have a video talking about those two forms, let us know if you can’t find it!

[@littleroyii]

Great video!! Your videos have been a great help as my current role is with an Ecommerce company and its my first time having to deal with sales tax. We are beginning to become a dropshipper for a client and I wanted to clarify one thing, if we don't have physical or economic nexus where our customer (the seller in your video) is, do we need to consider whether we have economic nexus where we are actually shipping the product to? So if we have nexus in the ship to location then we should charge our customer (the seller) sales tax unless they can provide a resale certificate or either the MTC or SST form?

[@LedgerGurus]

Yes that’s 100% correct!

[@JustHere940]

Thank you

[@LedgerGurus]

You're welcome

[@nursehaji]

You are so smart

[@LedgerGurus]

Thank you.

[@icy4640]

Great explanation! Thanks. Do you know if it works the same for sellers outside of US?

[@LedgerGurus]

Yes, it does.

[@Nikki-zl7rs]

Thanks so much for the information! The video was so helpful! Just one question - What are the 10 states that do not accept MCT or SST forms?

[@LedgerGurus]

CA CT MA MS HI MD VA DC NY

[@PuttingOnAirs726]

@@LedgerGurus i only count 9 states. what is the 10th state

[@mkinfovlog]

Superb, very informative video, your way of teaching is amazing. Can you make a video for a texas amazon seller that how to file quarterly sale tax reports and do we need an Amazon report to send to the comptroller or not? Please explain in your video. Thank you

[@LedgerGurus]

Great suggestion. We'll put that on our content list. Also, if you need the answer right away, you can schedule a sales tax consultation with one of our experts - calendly.com/ledgergurus-sales-tax/

[@CarissaSutphin-xl2xo]

Great illustration! I feel like so many companies are not fully grasping this concept - I "fight" with it almost daily. So... what if your drop shipper refuses to accept an MTC form (even though the state is listed on it)? Or better yet, how can I explain to them that our MTC form is acceptable?

[@LedgerGurus]

We did a video on that, too - kzbin.info/www/bejne/f6WQh6GLnpira5o

[@kfranzner]

Hi! This video was great, I loved how you draw the picture - that really helped. So I understood that there are 2 transactions that can have sales tax. The first one is between seller and customer and the second one is between seller and dropshipper supplier. I have a question regarding the second transaction. My eCommerce is based in DE, I'm foreign so I don't live in the US, I only operate with dropshipping on my website (woocommerce). My suppliers (the dropshippers) always charge me sales tax, even though my business is located in Delaware, where the sales tax is 0%. Considering my business is located in DE, should I be exempt from sales tax when ordering with the dropshippers?

[@LedgerGurus]

The dropshippers are charging you sales tax because they have nexus in the states they are delivering products to. The only way to avoid paying them tax is to provide them with resale certificates.

[@user-mf3rl7ye9g]

I just started dropshipping a month ago at the age of 16 and sales tax has me confused, this does help some thankyou

[@LedgerGurus]

Happy to help. We've got LOTS of other videos on our channel - kzbin.infovideos - and on our website - ledgergurus.com/.

[@Vava-kw5fo]

This is by far the best video I found on the subject - thank you Kexin! My question is: I conduct business from Hawaii (which doesn't have a sales tax, only General Excise tax) and my dropshipper has facilities in California and Kentucky. Where should I get the reseller certificate from? In Hawaii there is reseller's form G-17 that would allow the dropshipper to pay wholesale GE taxes instead of retail GE taxes. Is it the one I should provide to my dropshipper?

[@LedgerGurus]

You need to get one for your own state (Hawaii), as well as from any other states your dropshipper asks you to. That's not difficult with the SST and MTC forms. Here are some videos to help you with that: - How to EASILY Get a Resale Certificate for Dropshipping: kzbin.info/www/bejne/f6WQh6GLnpira5o - How to Fill Out the SST & MTC Exemption Certificate Forms: kzbin.info/www/bejne/eZ-Qp6aaaa2fiqc

[@kadavy]

Great video! Question: If you purchase and send products to a fulfillment warehouse that will ship your orders for you, does that automatically create a physical nexus in the state the warehouse is located?

[@LedgerGurus]

Depends on the state, but usually yes.

[@pickleballpick-apart9787]

Thanks for the video. I am about to open a Shopify store that drop ships items from Printify. I'm assuming Printify has economic nexus in all states. So, when filling out a MTC or SST form do I fill in information for each state? Also, concerning the 10 states that do not accept either form, I have to register to get a retail certificate? Thanks you!

[@LedgerGurus]

Here's our video on how to fill out those forms - kzbin.info/www/bejne/eZ-Qp6aaaa2fiqc&pp=gAQBiAQB.

[@DonCodeon]

Very good and detailed video, is this video also valid if “me“ the seller does not reside in the United States and for print on demand businesses?

[@LedgerGurus]

Yes!

[@Graymatter40]

HI LedgerGuru. This is very informative. Thank you. one question, I am a seller registered in Canada and have no physical presence in the USA but my dropshipper is in USA and I sell to USA customers only. do I need to charge sales tax for very first transaction? or does these Nexus apply to me as well?

[@LedgerGurus]

You only need to charge sales tax after you hit economic nexus in the states. So not on your first order :)

[@Patrick-ih9ou]

Hey, great video really! I'd be so so grateful if you could answer my 2 questions too, which adds to my understanding of what youve talked about in your video: 1. My dropshipping supplier which is Supliful, they do not charge me sales tax when i order from them. This should mean they would ask for a resale exemption certificate, but the dont do that either. So this just isnt my responsibility i guess? 2. Do i have a physical nexus, where my dropshipper supplier operates? I dont, right? Since im from abroad (germany), i wouldnt have to register in any state therefore, as long as i dont have economic nexus. Thank you so much for your videos, really appreciate you!

[@LedgerGurus]

1. Your dropshipper SHOULD be either charging you sales tax or asking for a resale exemption certificate. 2. No, you don't need to pay sales tax where your dropshipper operates. That's their responsibility.

[@obykanoby2555]

How des does this apply if I sell in Europe? If my products enter from a third country into an EU country, do I have to immediately register and charge VAT to that country, or do I have to reach a certain threshold depending on the country where above that point, I need to charge VAT to that country?

[@LedgerGurus]

Which country are you located in? And where does your drop shipper locate?

[@Herstoryyyy]

hi how does this work if our selling internationally ?

[@kerryscott4955]

This video is amazing, thank you so much! I do have a question, you said that it can be easier if the seller and the drop-shipper are located in the same state- why is that? Isn't it all based around where the product is shipping to? So, if the seller and the drop-shipper were both located in CA, but the product is shipping to UT, you would need a valid UT resale cert, and it doesn't really matter that the seller and drop-shipper are located in the same state?

[@LedgerGurus]

That's true. What she meant is that if both the seller and drop-shipper are in the same state, they have nexus in the same state, and so the seller is responsible for collecting the sales tax.

[@_._Cynda_._]

Great information 👍 As the reseller do I pay taxes to my state based on sales or profit numbers?

[@LedgerGurus]

Your question is a bit confusing, but I'll do my best with it. It depends on what kind of tax you're talking about. Sales tax is based on your sales into a state. Income tax is based on other things.

[@_._Cynda_._]

@LedgerGurus Thank you, yes I just figured out in my state, we pay taxes on gross sale total minus the shipping. You're amazing, loved this video 📹 ❤️ 💖

[@juanguillermoperezdelrio1742]

Hello. Thank you very much for the information. Does this explanation also apply to an LLC?

[@LedgerGurus]

Yes it does!

[@RobertsonBranding]

This was a great video and explained alot. But i do have a question. I am just starting out on my journey as an online seller and I only have nexus in my home state but i use printful and Printify which does have nexus in many states. Even though I dont have nexus and dont need to register to collect taxes in other states yet, if i provide Printify or Printful a resale certificate, would i then need to start collecting taxes from other states? Im not sure if i explained that well. Do resale certificates only work in the states i have nexus in? And if I dont need to collect sales tax from customers in other states because of my lack of nexus and i have provided a resale certificate to my dropshipper...who pays the sales tax?

[@LedgerGurus]

You can get resale certificates for 35 of the 45 states that have state sales tax laws by using the SST or MTC forms. You do not need to collect sales tax from your customers in those states until you have passed economic nexus thresholds there or if you have a physical presence. No one would pay the sales tax. You can learn more about this by watching this video: kzbin.info/www/bejne/eZ-Qp6aaaa2fiqc

[@davidtrammell2304]

No worries if you can't answer this one...even the SC Dept of Revenue is having trouble giving me a straight answer. So parts used on aircraft in SC are exempt from the 7% sales tax. From what I can tell, this goes for TN and FL too. My company is getting a part ordered through Tennessee and drop-shipped to SC from FL. The FL vendor keeps wanting to charge the TN middle-man sales tax, but we are under the impression that we don't have to pay sales tax on aircraft parts, including drop-shipping parts. Can you clarify on this any? Thank you for your time.

[@LedgerGurus]

From the FL vendor’s perspective, they charge sales tax where they have nexus and if the product is taxable in the delivery state, if you are certain that aircraft parts are not taxable in Tennessee, that product exemption itself should be sufficient enough to not pay them sales tax. I would find the legislation in TN and provide that to the FL vendor.

[@eren6072]

Really informative video, thank you so much! I read the comments and watched the video however I still have one simple question left: I have an online e-commerce business In NJ, and Dropshipper is located in Turkey. I as a seller receive orders from customers, and I also pay the cost of goods, and shipping invoices to the manufacturer (or dropshipper). In this case, I collect NJ sales taxes and file them, as I haven't hit any economic nexus in any other states yet. However, dropshipper never asked me for any resale cert or mentioned charging sales tax. While I am collecting and filing sales taxes, do they still need to register where they have economic nexus? As far as I know, they only sell to me, simply my 3 stores (different brands). So whatever I sell, they ship from there and they don't have any other business besides this. That's where I was confused, I charge sales tax in each of my brands, but we never talked about the sales tax part with the dropshipper. In this scenario, what is generally their responsibility then?

[@LedgerGurus]

Well, honestly, you don't need to worry about their sales tax responsibility. Since you're charging sales tax, though, they don't need to charge you sales tax, so it's all good.

[@caseyriley1014]

Oh a new video on almost exactly the kind of question I sent through email, well, maybe you'll see it here sooner, so... Say, I'm the seller, ordering items from the dropshipper, and sending them to customers... If I source items from a supplier for resale with tax exemption... Can I only sell that Item to customers in states where I already have nexus, and where I am capable of collecting taxes? That would make sense, but I'm having alot of trouble finding information on the topic, or with understanding it... Which is opening up a lot of other questions for me, like...Would I have to pay taxes to a manufacturer on some products but not all in order to comply? or would It be easier to pay taxes myself on all products until I reach nexus in multiple states? So, If I had to sum up all the questions, that brings me, then I would ask, how does tax exemption work if you're starting to make bulk orders, and hold inventory on items bought for resale, when you have resellers permits for many states, but haven't reached nexus in all states?

[@LedgerGurus]

Hi! If you are buying products to resale to customers instead of having the suppliers drop ship your product, then you shouldn’t need to pay tax on your purchase because you are buying products for resale and you will charge tax to the end consumer when you sell those products if you have nexus in where the customers are located in.

[@caseyriley1014]

@@LedgerGurus OK, so I'm just over thinking, and over complicating things then. Right? Whether I bought tax exempt or not doesn't matter, I simply sell and ship the item and collect and remit sales tax for the states where I have nexus... And in the ones that I don't, It doesn't matter. That makes sense to me! Thank you.

[@TraceyPoland]

Thanks for your video! If I live in Colorado and have a sales cert in CO and sell on Shopify but my dropshipper is in NY can I use my CO sales tax lic to purchase wholesale from them? And do I have nexus now in NY because that’s where my dropshipper is? Hopefully that makes sense 🤪

[@LedgerGurus]

If you are purchasing product that you are THEN selling to your customer, yes. But if you are dropshipping (which generally means that the customer orders from you -> you order from your dropshipper -> the dropshipper invoices you and sends the product to your customer), then it will only apply for CO customers. And no, you don't have nexus in NY because you don't own the product there; your dropshipper does.

[@gabeabramovich8096]

Great vid, quick question: Canadian company, suppliers in US, customers in US. I do have an EIN. Do I need to provide the SST/MTC forms to my suppliers, or the Canadian Resale Exemption form instead?

[@LedgerGurus]

Since the suppliers are US companies, they will most likely want US forms. Again, each state has different regulations on documentation they accept, but generally we'd recommend using the MTC/SST forms since they cover most states.

[@jeffleblanc3419]

Thank-you very much for sharing this info! Great video, extremely informative! I do still have a few questions... I have a brand new Canadian Corp and my EIN/FEIN from the IRS (and that's it so far). So no physical or economic nexus yet. My questions are around the Resale Certificate. 1. Do I need to register for a Sales Tax License in at least 1 State (such as Wyoming) in order to use the SST/MTC forms? 2. What if the supplier is in California or one of the other more difficult states? Then what do I do? Then do I need to register for a Sales Tax License in that state in order to get a resale certificate? 3. If I do need to register for a Sales Tax License in a particular state such as California, am I then obligated to start collecting sales tax from CA customers right away or not until passing economic nexus?

[@LedgerGurus]

1. You only need to register in states where you have physical or economic nexus. So if you don't have that anywhere, you don't need to worry about registering yet. 2. You can't get a resale certificate in a state unless you have already registered for a sales tax permit there. The reason why is that a resale certificate allows your supplier to pass the obligation for collecting and remitting sales tax to you to pass on to a customer. If you aren't doing that, you can't get a resale certificate. Remember, it is illegal to collect sales tax unless you have already registered to do so in a state. 3. Once you register, you will be required to start collecting right away, so don't do it until you have passed the economic threshold. Here are some more resources for you: - *10 Steps to Ensure Sales Tax Doesn't Burn Down Your eCommerce Business* PDF (economic thresholds for each state at the end): ledgergurus.com/portfolio/10-steps-to-ensure-sales-tax-doesnt-burn-down-your-ecommerce-business/ - *How to Fill Out the SST and MTC Exemption Certificate Forms*: kzbin.info/www/bejne/eZ-Qp6aaaa2fiqc&pp=gAQBiAQB - *FREE SALES TAX SOLUTION for Online Sellers | Streamlined Sales Tax* : kzbin.info/www/bejne/bZnLmoN7p9Vjrcksi=aC1OmkGUML05f7-g

[@FreddyPrays]

@@LedgerGurus so if the supplier has either physical or economic nexus and charges me (the seller) sales tax on every single Print on demand product purchased on my site, doesn't that mean they're eating into the little margin that exists if I'm not charging the customer sales tax because I do not have nexus or physical presence?

[@LedgerGurus]

@@FreddyPrays Printful will stop charging you sales tax on all purchases once a resale/exemption certificate is given. Then it will be your responsibility to charge sales tax to your customers, only in the states where you have nexus. Example: ABC company has two customers - one in Texas and one in Florida. ABC company only has nexus in TX, so they will only charge sales tax to that customer and it will be up to the customer in FL to pay use tax on that purchase on their own return. The resale certificate just tells Printful that the products the company is buying from them are for resale and not necessarily where the company has nexus.

[@FreddyPrays]

@@LedgerGurus makes total sense but honestly, after analyzing the margins on a POD model, they are paltry. I decided on going with a local print shop and buying my own inventory wholesale directly and providing it to the print shop so that I'm just paying for the print ink, configuration and labor. Yes, that means I have to do the fullfiment and shipping myself and I carry the risk of inventory but I more than doubled my margins.

[@LedgerGurus]

@@FreddyPrays Good for you! Knowing your numbers allows you to make better decisions, and you are the poster child for that. Good luck on your new endeavor!

[@laurenclark8527]

While I agree you can use the MTC form - some states will NOT accept it if you are not registered in their state...PA for example. Will only accept it if its a PA number! Otherwise you have to fill out a PA resale cert! I was under the impression that you can use the MTC for states outside your nexus scope. Have you experienced any of this? Less the 10 states that will only take their own**

[@LedgerGurus]

Some states do not accept out of state resale certificates. You can either register in that state to get a permit, so you can have that resale certificate. But you will then need to start collecting tax from your customers in that state as well. Or you can pay the PA tax and then apply for a refund from the state after proving it was for resale. There are pros and cons to both. There are 10 states that are pretty firm on not accepting out of state resale certificates: Alabama California. Florida. Hawaii. Illinois. Louisiana. Maryland. Massachusetts. Washington. Washington D.C.

[@samlal5230]

Hi, This is the best-explaining video I have watched so far about the sales tax. Thank you so much for sharing. As a Pennsylvania resident starting a dropshipping business with CJDropshipping or Aliexpress, supplier will be from China. do I need to charge Pennsylvania sales tax from the very first sale? If so, do I need a reseller certificate before collecting, and should I wait for the nexus threshold in other states before collecting sales tax there? Just want to be tax-compliant from the get-go, so any guidance would be amazing!

[@LedgerGurus]

Yes, you need to register for a permit in PA and start collecting & remitting sales tax from the beginning. You'll definitely want a resale certificate for PA. You can also use the SST and MTC forms for other states, too.

[@samlal5230]

@@LedgerGurus Thank you so much for the reply! Also, do I need to register an LLC? And get EIN from the IRS? I was thinking of starting as a sole proprietorship. Is registering the business is same as getting the sales tax or different?

[@LedgerGurus]

@@samlal5230 Registering your business is not the same thing as getting a sales tax permit. You'll need to contact a tax accountant to answer these questions.

[@kayeetang3643]

Hi LedgerGurus, thank you for your video, it is very clear but i still have a question. I run an online store in CA (where i live), my business is registered in WY. Let's say I make enough sells in NY to cross the economic threshold in November 2023, but it doesn't make sense to start charging sales tax in November 2023 while the sells to NY from Jan - Oct 2023 don't get charged any sales tax. I should be charging sales tax for all transactions right? if i do, what do i do with the sales tax that was collected from Jan - Oct 2023? Also, in this case, do i count as "physical presence" in CA if i work at home and have no inventory and my company is registered in WY? Thank you for your time in both answering questions and making great videos.

[@LedgerGurus]

1) You only charge sales tax on transactions made AFTER you pass the threshold. You aren't responsible for the sales tax on transactions before that, so you wouldn't have to worry about sales tax from Jan-Oct 2023. If you did collect sales tax before you registered you can either register now and back date it to when you started collecting sales tax or return the collected sales tax to the customer. 2) Yes, you still have physical presence in CA because you live there. People and/or property in a state constitute physical presence.

[@ArkadiaTube]

Using your example with Utah and California. The seller gets a resale certificate, lives in California and doesn't have nexus with the customer. So the seller does not charge the customer sales tax. The dropshipper doesn't charge the seller sales tax because of the resale certificate. Does the dropshipper still have to charge the customer (in Utah) sales tax then? If the dropshipper does need to charge the customer, how would that typically work in an online store? Typically, when you set up an online shop, the customer goes to the sellers online store and pays for the product (this is the only time they make a payment usually). The dropshipper, then receives the order, sends the product and charges the seller. Does the dropshipper also have to find a way to charge the customer sales tax AFTER the purchase has already been made? I've never had that kind of scenario as a customer where I pay an online store for the product and then get another invoice sent to me later for sales tax...so just wondering how this is handled (if it's even a thing).

[@LedgerGurus]

The dropshipper never interacts with the customer so they would not charge any tax. The dropshipper only sends invoices to the seller.

[@kellydean4232]

Great video! I’m about to start my online store using printify. So if I understood, I don’t have to charge sales tax until I reach the threshold amount. Can I still have the reseller form so I don’t get charged sales tax from printify?

[@LedgerGurus]

You should only register to collect sales tax in states where you have physical presence (your location, employees, etc) or in states where you have crossed the economic threshold. So you are correct, you should not charge sales tax to your customers unless your customer is located in states where you have registered for sales tax due to physical or economic nexus. To avoid being charged sales tax by Printify, you need to give Printify a valid resale certificate. If you are registered for sales tax in the same state that the dropshipper is located, you can use that state's resale certificate. However, if you are not registered in the same state that the dropshipper is located, you should use one of the SST or MTC exemption forms. The links for these forms are located on the "How to Fill Out the SST and MTC Exemption Certificate Forms" video - kzbin.info/www/bejne/eZ-Qp6aaaa2fiqc

[@TheEclecticEasel]

Great Video!! Best explanation I have found so far but I am a little confused about what you mean when you say "physical location" as it relates to my scenario. So my drop shipping e-commerce business (I am the seller using dropshippers) is registered as an LLC in WY through a registered agent so no physical location, but I physically live in Florida and I have no employees working for me. Does the fact that I live in Florida meet physical nexus for Florida and result in me needing to aquire a Florida resale certificate eventhough I do not yet have economic nexus in Florida?

[@LedgerGurus]

Yes, because you are physically present in FL.

[@TheEclecticEasel]

@@LedgerGurus Ok, thank you!!

[@thepaintedfinish-paintingc6764]

Do the dropshippers warehouses and offices create a physical nexus for the dropshipping retail seller, if so, how would seller know where all the states are the dropshipper has nexus so the seller can charge sales tax in those states?

[@LedgerGurus]

Seller’s nexus is not the same as the dropshipper’s nexus. Dropshippers warehouses and offices and inventory will create physical nexus for the dropshipper so the dropshipper will charge sellers sales tax on those states. The sellers need to pay those tax or provide the dropshipper with resale certificate. Seller’s nexus is created by their customers and their physical presence.

[@christiantrujillo4323]

Can you please let me know if this is correct? I’m in state 1 and I’m the seller. The drop shipper is in state 2. The buyer is in state 3. Seller provides a reseller certificate to the drop shipper. Seller has sold less than 200 and 100k in buyer state(assuming that’s the threshold) Is it correct to say that the buyer will not pay sales taxes at all? The seller won’t pay them either. And the drop shipper won’t. Let say that it’s a 20k product, that the buyer buys every month and it’s the only costumer in state 2. The first 5 months, the buyer will not pay any sales taxes… and then on the 6th month the buyer will see an increase in the total amount of the invoice. Is this right? Or this happen once a year? And after, let’s say 12 months, assuming the first purchase happened in January, the state 2 will reach the threshold triggering the seller to register on state 2 to collect the taxes. Thanks!

[@LedgerGurus]

For detailed situations like this, we recommend you talk to one of our sales tax experts about the particulars so you're getting the right advice for your situation. You can schedule that here: calendly.com/ledgergurus-sales-tax/?KZbin&

[@king-eee]

Hello there, I just have a couple questions. So technically what you’re saying is if the drop shipper and selling don’t live in the customers state the seller doesn’t charge sales tax, correct? And if the drop shipper has someone working in the customers area they need a resale certificate from the seller, correct? And if the seller is in the area of the customer that means the seller charges sales tax correct? Do I need to charge sales tax if I am doing drop shipping in Canada? I get a lot of customers to my store from Canada but I haven’t opened a Canada market because I’m not sure how taxes work. Please let me know

[@LedgerGurus]

As a dropshipper you need to ask yourself where you have nexus. The transaction is between you and the seller, not with the customer. If you have nexus in Canada, you should register for HST/GST and collect.

[@RochelleBradley-pp6xo]

So if the seller lives in one of the four states in the USA that do not charge sales tax, the only thing they need to consider is whether they've reached their financial nexus in the state the customer(s) reside in? And because the seller resides in one of those four states...does the dropshipper still tax them (based on where the customer lives)?

[@LedgerGurus]

Yes on the first question. If the seller lives in one of the four states that don’t have sales tax, the dropshipper shouldn’t charge them anything in those four states. The dropshipper will charge them where customers live if the dropshipper has nexus in that state.

[@744787]

So to be clear. Even if im only an online business (im starting shopfiy with printful), i still have physical presence (my home in CA) and would need to register to collect sales tax in my home state? Regardless of sales? Im not selling from my home. Also. Can i give printful a resale certificate if im not allowed to charge sales tax yet? Thank you so much for this video, it has cleared up so many things.

[@LedgerGurus]

Yes, you do have to register and start collecting in CA because you have a physical presence there. No, you can only get resale certificates for states where you have nexus, either because of physical presence or because you've passed the economic threshold.

[@JustHere940]

A quick question here: if I carry no inventory as a dropshipper, where to include the cost of the material in schedule c form?

[@LedgerGurus]

We don't do income tax. You'll have to ask your tax accountant that question.

[@xiangshenglin2908]

Does the drop shipper calcualte the nexus threshold based on where their end customers sit instead of the retailer? Let's say you are a UT dropshipper that has nexus in CA. You sell 100k to UT retailer that eventually sells to CA customers. Do you count 100k to CA nexus threshold or UT thresholde?

[@LedgerGurus]

As a drop shipper, the nexus threshold calculation typically depends on the destination of the goods (where the end customers are located) if you have nexus in those locations. In your scenario, if you're a UT drop shipper with nexus in CA and sell goods to a UT retailer that sells to CA customers, the $100k would count towards the CA nexus threshold, not UT, due to the final destination of the goods being in CA.

[@yassinevlogs6569]

I have a kinda strange question. For example What if I buy I product X with 100$ from an online platform. Then sell the item to MYSELF on my own website get funds to buy a product Z that I will sell on a different platform for 200$. At what stage(s) I should collect taxes ????

[@LedgerGurus]

When you sell the $200 product!

[@Ryan-fc9le]

Would a seller in Oregon ever have to worry about a resale cert since there is no sales tax in that state?

[@LedgerGurus]

Not for the state of Oregon, just for other states.

[@BOBOKELLYFILMS1]

Hi, I am just starting dropshipping but I live outside USA but targetting USA customers , so any idea on how the taxes work on international online retailers so that the products shipped won't be hold on customs because of taxes or usa taxes doesn't matter on this matter ?

[@LedgerGurus]

Are you the dropshipper or seller?

[@BOBOKELLYFILMS1]

@@LedgerGurus I am a dropshipper mum

[@aditiLMAO]

im not a official business, LLC isnt registered. i run a ecommerce business and i live in texas. i utilize products from dropshippers who dropship products from china (i dont have inventory), and sell it internationally. do i only take tax on texas?

[@LedgerGurus]

Yes. You'll need to register for a sales tax permit before you start collecting taxes, but then yes, you'll need to collect and remit sales tax for Texas customers.

[@davidbutler1209]

Do you, as the seller need to register with your state for sales tax?

[@LedgerGurus]

Yes because you have physical presence in your home state.

[@sebagleba5342]

So as a dropshipper I have to charge sales tax to the seller when a product is shipped to a destination customer state where the seller doesn't have a nexus but I have? Thank you.

[@LedgerGurus]

That's correct.

[@BrettHumberstone]

Another question for you. So I have a ecommerce store (based in canada), I am using dropshippers from the US and I will only be selling to US customers. Will this cause a physical nexus or no? Also. do I need a Canadian import/export business number? I think not as I will not be importing or exporting any goods or services.

[@LedgerGurus]

No physical nexus for you and you won’t need a Canadian import/export business number. Your dropshippers’ physical nexus doesn’t transfer to you! :)

[@hankyberky5829]

Hi Last year started a busines in marylandand started dropshipping and made some sales. But i did not sell anyhting here in usa , all my sales were in canada and mexico. In this case do i nees pay sales taxes to state?

[@LedgerGurus]

No. US sales tax only applies to sales made into US states.

[@creativewoman2160]

Hi. If you register a business a a particular state using a registered Agent service, does this mean you have physical nexus there?

[@LedgerGurus]

Not necessarily, depends on the state. For example, Wyoming registered agent doesn’t create nexus.

[@loudstory7666]

Hi, Thanks for this video which clarified a lot... but raised also a question! I'm starting a dropshipping business: I'm physically located in France, I want to target US customers, and the products will come from dropshipping companies based in China. Is it accurate to say that I will have to collect sales taxes from US customers only after my sales exceed a threshold defined by each state? My supplier is located in China: will they charge me with a sales tax, and therefore will I need a resell certificate? Thanks for any clarification you can provide!

[@LedgerGurus]

Yes that’s correct in that you don’t have to collect sales tax until your sales hit a certain threshold in each state. With your supplier, it’s totally up to them (if they have economic or physical presence in US states). Hopefully they won’t but if they do you can provide resale certificate on the SST form without registering in any US states.

[@LedgerGurus]

kzbin.info/www/bejne/eZ-Qp6aaaa2fiqc here’s the link for the SST video

[@loudstory7666]

@@LedgerGurus Hey! THanks so much for taking the time to reply. This is of great help for me!

[@AaryaAarya-iv1ch]

"Do I, as an Indian dropshipper selling products through my website with suppliers from AliExpress, need to pay sales tax in the United States, considering I don't have a physical presence or employees in the U.S.

[@LedgerGurus]

No, until you pass economic thresholds in states, you don't need to worry about sales tax.

[@aminebna7257]

Hi, can i ask you please , if im UK company (so i dont have nexus in USA) and make dropshiping from Suppliers like CJ Dropshiping. should i charge the costumers and collect any taxes or should i pay any taxes when i preorder a stock in CJ Dropshipings from warehouse in china and place it in CJ warehouse in usa and than sell to USA costumers ? and another question please if i make dropshiping from china supplier direct to usa costumers , are there any sales taxes or kind of taxes to pay ? thank you very much and i will be more than happy for your Answer.

[@LedgerGurus]

It is illegal to charge sales tax in the US if you have not already registered for and obtained a sales tax permit in any particular state. You need to register in states where you have physical presence and/or have passed the economic threshold. You can get more information in our free sales tax guide where we give you 10 steps to follow for sales tax compliance - ledgergurus.com/portfolio/10-steps-to-ensure-sales-tax-doesnt-burn-down-your-ecommerce-business/

[@iamthenightelf4282]

This helped a lot I was super confused on nexus. There is just one more thing I’m confused on. So let’s say I meet the threshold for having to pay sales tax or I sell to someone in my state through my online store. Do I need to pay sales tax on what I charged the customer or just what I profit from the transaction. Like if the dropshipping company charges me $20 for a hoodie and I sold it for $40 do I have to pay sales tax on the whole $40 or would I just seem to pay it on the $20 I made from the transaction? Also if I charge for shipping is that included in what I would have to pay in sales tax?

[@LedgerGurus]

Sales tax is charged on the whole transaction, not your profit. And state rules differ on whether shipping is taxed, too. You'll have to research your own state to determine whether to charge sales tax on it.

[@iamthenightelf4282]

@@LedgerGurus I also keep seeing things about a resale license. If I get that will that void me having to pay sales tax in some states with nexus. Currently I am paying printful sales tax per order so do they cover my end of sales tax too then? I tried to understand it on printful’s help page but it’s hard for to to grasp, taxes are confusing sorry 😅

[@LedgerGurus]

@@iamthenightelf4282 It doesn't void having to pay sales tax. A resale certificate means that you don't have to pay sales tax to Printful. Once you have nexus in that state, you'll still be responsible for registering for a permit and collecting & remitting to the state. Here's a video explaining how to do it - kzbin.info/www/bejne/f6WQh6GLnpira5o

[@scardenas3100]

Hi there! First of all, thank you for such an informative video! My business is from Latinamerica and I am from here and residing here, however I am selling products and shipping them to the USA through Printful (print-on-demand model), according to what you mentioned in the video, would I only be responsible for paying the dropshipper (Printful) taxes?

[@LedgerGurus]

Yes, for now, until you start reaching economic nexus in individual states.

[@scardenas3100]

you guys are amazing thank you!@@LedgerGurus

[@7Julez23]

Hello, if person starts online selling and only via shopify & only utilizes dropshipping. What is there category? Meaning i would not be a marketplace facilitator, but what would be my category? Thank you.

[@LedgerGurus]

Your category is online retail.

[@donadoig6883]

I am a Reseller. If I want to provide an SST form to my drop shipper for a state that I have not reached economic nexus in, what Number would I list for that state on the SST form?

[@LedgerGurus]

Your home state number, if you don’t have that you can use your FEIN, drivers license number or passport number.

[@me-me-me-me-me]

Does it apply to llc single-member foreign owned?

[@LedgerGurus]

It applies to anyone selling in the US.

[@rodrigoreyes8060]

Hello I have I web page so I have I problem to set up this tax

[@LedgerGurus]

Good luck. If you need specific guidance, you are welcome to schedule a call with one of our sales tax experts - calendly.com/ledgergurus-sales-tax/?KZbin&

[@xtreamv]

Did you explain what "nexus" was, or did I miss it?

[@LedgerGurus]

You can learn more about what nexus is here: ledgergurus.com/sales-tax-nexus/

[@itsmase21]

Hi I'm wondering how this works for other countries. If I'm in USA and using AliExpress but someone in Europe buys my product.

[@LedgerGurus]

You don’t need to pay sales tax for products leaving the US. Sales tax only applies to when US consumers purchase the products and they get delivered to US addresses.

[@amodestmessengerchalonanto5150]

This video helps tremendously but I still do see where I fit in to this Nexus + Paying Taxes equation. Perhaps my particular situation is quite different than most. Currently, I live in Taiwan and I am beginning an online Drop Shipping Business with Shopify. For my drop shipping business, I plan to purchase products fom China and sell them to customers in the USA and maybe the rest of the world. Does this mean that I have Phyical Nexus because I am the business owner and I live in Taiwan? And, to my understanding, as I am the business owner I am the dropshipper. These are some of the things that I am finding confusing. A little clarification will help tremendously. I need to sort out these tax issues before I open for business.

[@LedgerGurus]

Hi! With dropshipping, the dropshipper delivers products to end consumers but bill the sellers. Are you the dropshipper in this instance? Or are you selling directly to consumers?

[@amodestmessengerchalonanto5150]

@@LedgerGurus I’m selling directly to the consumers. So, technically I’m not the “drop shipper”? I’m actually the seller providing products in the drop shipping business…? These may seem as a stupid question but I’m totally brand new at this and I’m not trying to violate any laws or tax regulations.

[@LedgerGurus]

@@amodestmessengerchalonanto5150 you are totally fine! Do you use a dropshipper? Or do you own the inventory and ship them directly to end consumers?

[@7Julez23]

Hello there! If selling online shopify only will via drop shipping fulfillment...i would only register in home state.( physical nexus) im i collecting and remitting sales taxes from customer even if i dont have economic nexus yet? Thank you.

[@LedgerGurus]

Yes, you'll need to collect sales tax from customers in your home state, not any other states yet. For more information on nexus and when to collect, download our free PDF 10 Steps to Ensure Sales Tax Doesn't Burn Down Your eCommerce Business - ledgergurus.com/portfolio/10-steps-to-ensure-sales-tax-doesnt-burn-down-your-ecommerce-business/

[@NelsonCantu-go7en]

is a resale certificate and a texas sales use and tax the same thing?

[@LedgerGurus]

No. But when you have a sales and use tax permit, you can submit a resale certificate for that state to your dropshipper. At that point, you'll be required to collect and remit sales tax from your customer.

[@AwesomeK285]

What about all 3 (drop shipper, sellers and customer) are in GA? Do they have to collect sales tax?

[@LedgerGurus]

If the seller is located in GA, they'd have to register for a sales tax permit there since they have physical presence in the state, which means the seller is responsible for collecting and remitting sales tax from the customer.

[@AwesomeK285]

@@LedgerGurus thank you for responding. Would it be better not to ship nor do business with your current state since dealing with the sales tax would be too much hassle, if someone has just a very small e-commerce business.

[@LedgerGurus]

@@AwesomeK285 That's entirely up to you, but you still need to have a sales tax permit since you are physically in the state.

[@huyngo9785]

Hello, I'm starting my ecommerce print on demand business (drop shipping) and I've only registered for sales taxes only in Florida since that's where I live. I've made no online sales yet. Do I need to register for every state to obtain a resales certificate before I launch my website? I'm worried that if I make a sale online and I don't charge tax, later down the line when I do hit the economic threshold for that state I will owe money. If I don't need to worry about that now, when should I worry about it?

[@LedgerGurus]

Hi! You don’t need to register and collect sales tax until AFTER you hit the economic nexus threshold. All the sales before that have no sales tax liability. And you don’t have to register in all the states, watch this video and provide them resale certificate this way: kzbin.info/www/bejne/eZ-Qp6aaaa2fiqc

[@FreddyPrays]

@@LedgerGurus quick follow-up question to his question, I am in the same exact situation (same state too). If we obtain resale certificates so that Printful can stop charging us sales tax, does this mean we have to start collecting sales tax from the customer via the Shopify store since we become exempt from tax on the Printful side with the resale cert? Or does the resale cert tell Printful that the transaction charged on both ends (Seller to customer and Supplier to Seller) is essentially free from tax liability UNTIL either physical or economic nexus is achieved?

[@presidentkeef3835]

Hi, I am a Canadian based e-commerce store selling to US customers using US dropshippers. Does that mean that I only have to worry about economic nexus?

[@LedgerGurus]

Probably, since you don't have physical presence in the states.

[@alleyshopz-laurenrobbie4275]

Hi! The presentation is great. However, what if the seller is based in another country, say Kenya, dropshipper located in China, buyer is Sweden, does the seller need to collect VAT?

[@LedgerGurus]

It depends on the VAT rules in Sweden.

[@Sobdevpro]

I have a doubt about something. Im the seller and Im based in France (because im french), if i sell to US costumers with a US supplier, will I have to pay sales tax?

[@LedgerGurus]

We did a video about this: kzbin.info/www/bejne/f6WQh6GLnpira5o

[@khadijahv.723]

I am a new drop shipper in USA and selling global form a supplier in China. I am struggling to comprehend my responsibilities. I dont intend to make an incredible amount of revenue as it is my first time. do i need to charge taxes on my shopify- i am not even sure the right way to articulate the question, thanks in advance! love your content!

[@LedgerGurus]

I would suggest you start with our free masterclass - ledgergurus.thinkific.com/courses/the-uncomplicated-truth-about-sales-tax and the International Sellers' Checklist - ledgergurus.com/portfolio/international-sellers-checklist/.

[@Morena_Arch]

Do you help dropshippers from Canada selling to US as well?

[@LedgerGurus]

Yes definitely!

[@Godsfavourite101]

If I Am the seller from UK and not registered with VAT yet, what is the revenue threshold for me to get registered for VAT?

[@LedgerGurus]

If you are physically in the UK, there’s no threshold. You need to collect VAT from your very first sale.

[@baderalmoayed9418]

Hi thank you for the video, I don't live in USA im planning to start dropshipping and supplier is in US and selling to US customers. Will I be liable too for sales tax threshold if yes what procedure I need to do. Thank you

[@LedgerGurus]

Yes, you are liable for sales tax until you pass the nexus threshold in each state. You can read more in our sales tax download: ledgergurus.com/portfolio/10-steps-to-ensure-sales-tax-doesnt-burn-down-your-ecommerce-business/

[@mrsbrooks37]

Hi, please verify if I need to register with my state Michigan for anything. Im understanding the exemptions. Thank you. Great Job

[@LedgerGurus]

If you are selling tangible personal property then you need to register with your home state.

[@anthonyknight1746]

If the supplier was based out of Arizona, wouldn't the seller have Physical Nexus in Arizona too because that is where the product is being stored?

[@LedgerGurus]

Not necessarily. Since a dropshipper never really owns the product, they do not have nexus where it is stored.

[@mehruanand8778]

I can still register as a certified reseller in my state right? I have a complicated situation. I submitted my reseller form to printify, incase I want to sell in person or wholesale manually. I recently launched my shopify store. With Etsy everything was very seamless but now if customer orders something through shopify website, according to economic NEXUS they will only be charged if they are in New york ( since I just launched my store) but if someone from CA buys something they wont be charged sales tax , what will printify charge me? Also, Etsy charges sales tax everywhere and doesn't care for the NEXUS? Sorry this is a loaded question but I could use some help here.

[@LedgerGurus]

I definitely encourage you to schedule a consultation with one of our sales tax experts to get all of these questions answered. You can do that here: calendly.com/ledgergurus-sales-tax/?KZbin&

[@mehruanand8778]

@@LedgerGurus thank you! I watched a few videos and already submitted the MTC and SST with printify. I left another comment on the SST/MTC video. If it's a simple answer of yes or no, would appreciate it. If not, I will probably schedule a call. Thank you again, simply love the videos and explanation.

[@mrsmichelecarroll]

I am just starting an online store (Etsy) and will be using a print on demand company for my merchandise (they will be printing and shipping the products to the customers). I am residing in CA currently (will be moving to TN in a few months). Do I need a resale certificate or can I sell without? If I sell without, can I offset my pricing for products to include the sales tax that the POD company charged me? and if I am understanding this correctly, I would only charge sales tax to any customers from CA (while I am still residing in CA, and then once I move to TN I would only charge sales tax to the TN customers)?

[@LedgerGurus]

Watch this video for more details on sales tax exemptions - kzbin.info/www/bejne/ep3VhZmwgNR3h7c. If you have more questions, I suggest you schedule a sales tax consultation - calendly.com/ledgergurus-sales-tax/

[@Ms_Complexion_V]

I am planning on launching a e-commerce using drop shipper. I have my resale certificate. I’m selling through my Shopify store. I am selling in U.S. only. When I fill my Shopify taxes section, do I charge sales tax initially at launch to customers or do I have to wait until I get enough sales in those states to meet their threshold, and then add taxes? So for example my customer in Pennsylvania may not pay sales tax on first purchase if they are the third person there to buy, but they come back a month later and may be charged sales tax because I would have gotten enough purchases from that state to meet threshold?? 😅

[@aizazghumman4447]

Thanks its bit helping me but i have question if you can give me answer then everything it will be clear. My company registerd in United kindgom and my target marke is USA can i Carges sales tex from my customer are not ?

[@LedgerGurus]

You can always voluntarily register and then collect sales tax. But once you hit economic nexus threshold, you are legally required to collect sales tax.

[@vonkunstler884]

My Dropshipper is in Illinois. All I had to do was provide my CA resale certificate. Is this not correct?

[@LedgerGurus]

You can use the MTC form. I have a video that talks about how to fill out the SST and MTC form