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Q: FLORIDA SALES TAX FOR OUT-OF-STATE ECOMMERCE ( Answered 4 out of 5 stars,   0 Comments )
Question  
Subject: FLORIDA SALES TAX FOR OUT-OF-STATE ECOMMERCE
Category: Business and Money > eCommerce
Asked by: pabiz-ga
List Price: $20.00
Posted: 08 Feb 2006 09:42 PST
Expires: 10 Mar 2006 09:42 PST
Question ID: 443148
I have a sole proprietorship in Pennsylvania (home-based business). I
am required to pay PA sales tax on goods & services sold to PA
residents, but am not required to collect sales tax on out-of-state
customers (I am near the MD border so do get quite a few). I am now
expanding my business to e-commerce, so obviously will have many more
out-of-state customers. I will be using a drop-shipper based in
Florida for this new line of products. The customer will pay me the
retail price with their credit card. I will forward my orders to the
drop-shipper, and pay him the wholesale price with my credit card. He
will then place orders with various manufacturers & distributors in
many different states, and have the goods shipped direct to my
customer. It was my understanding that I still only had to charge
sales tax to PA customers. However, I recently received an email from
my drop-shipper saying "all shipments with destinations in Florida,
regardless of where they ship FROM, will be charged 7% sales tax."
Technically, since I am paying him with my credit card, he is selling
to a PA customer, not a Florida customer, even though it may be
shipping to a Florida address. What's the deal - do I have to charge
Florida sales tax for my Florida customers or not? Is there a chapter
& verse in the Florida tax code I can quote him to convince him not to
charge tax?
Answer  
Subject: Re: FLORIDA SALES TAX FOR OUT-OF-STATE ECOMMERCE
Answered By: wonko-ga on 08 Feb 2006 13:18 PST
Rated:4 out of 5 stars
 
My research suggests that if you obtain a valid state exemption
certificate from the State of Florida, then your drop shipper will not
be liable for sales tax on shipments to Florida addresses.  Your best
bet is to contact Florida Taxpayer Services at 800-352-3671 to find
out precisely how to handle your situation and how to obtain such a
certificate.  You may also be able to structure your businesss
relationship with the drop shipper so that they are not liable for
Florida sales tax.

Sincerely,

Wonko

Sources:

""My eBay business is based out of my home in New York, but I sell
products that several, large, out-of-state distributors drop ship for
me. If I sell to a buyer located in the same state as one of these
distributors, do I have to charge that state's sales tax?"

When you use a drop shipper, you're selling products that are shipped
directly from that company's warehouse. Once you've notified them
you've made a sale, they ship the goods to the buyer. Technically, if
the drop shipper is using its own address labels on the packages and
is accepting returns of damaged or defective items, then they, not
you, are the real seller of the items, and they should be charging
sales tax to buyers living in any state where they have manufacturing,
warehouse or office facilities (not just to buyers located in the same
state as the facility you're dealing with). Ask if the drop shipper
will use your address labels with your New York address and let you
accept returns for credit. If they won't do that for you, then make
sure your drop shipper agrees in writing to pay all sales taxes that
may be due on sales you generate for them."

"Frequently Asked eBay Tax Questions" by Cliff Ennico, Entrepreneur
(October 31, 2005) http://www.entrepreneur.com/article/0,4621,324214,00.html

"Here are some examples of business activities, product uses, and
consumptions requiring the collection of sales tax or the payment of
use tax:

Sales of taxable items at retail. 
Repairs or alterations of tangible personal property. 
Rentals, leases, or licenses to use real property (for example,
commercial office space, mini-warehouses, or short-term living
accommodations).
Rental or lease of personal property (for example, vehicles,
machinery, equipment, or other goods).
Charges for admission to any place of amusement, sport, or recreation. 
Operating private membership clubs that provide recreational or
physical fitness facilities.
Manufacturing or producing goods for sale at retail. 
Importing goods from any state or foreign country, for sale at retail
or for use in the business.
Selling service warranty contracts. 
Ordering and using, on a regular basis, mail-order products on which
no sales tax was charged.
Operating vending or amusement machines. 
Providing taxable services (for example, investigative and crime
protection services, interior nonresidential cleaning services, and
nonresidential pest control services).
If you are unsure whether your business is required to register to
collect sales tax, contact Taxpayer Services (see "Whom to Call")."

"Florida Sales and Use Tax" State of Florida
http://www.myflorida.com/dor/taxes/sales_tax.html

"Tax Exemption Basics
Manufacturers sell products to distributors. Sometimes the
manufacturer ships the product to the distributor's office in the
distributor's home state. Sometimes the manufacturer drop ships the
product to the end user on behalf of the distributor, and the end user
is in the distributor's home state.

In these two situations, the distributor should provide the
manufacturer with a copy of the Tax Exemption Certificate for the
distributor's home state. This provides the manufacturer with evidence
that the distributor has registered with his home state as a business
that distributes product for resale. This allows the manufacturer to
waive charging tax on product shipped to that distributor or drop
shipped to an end user within that distributor's home state.

If your distributorship does not have physical presence such as a
sales office, distribution center or manufacturing facility in a
state, you are not required to collect sales tax from your end user
customers. The legal precedent under which states must operate stems
from a 1992 U.S. Supreme Court decision, Quill vs. North Dakota.
Quill, the office supply catalog sales company, had been charged with
sales tax violations by the state of North Dakota. Quill drop shipped
orders into that state, but had no physical presence there. The court
ruled that Quill was not required to collect sales tax because it did
not have physical presence in North Dakota."

"When a manufacturer drop ships a product to an end user on behalf of
the distributor and the end user is in a state other than the
distributor's home state, the tax situation can be confusing. That's
because although the distributor may not have physical presence
(called "nexus" in state tax language) in those states, some
manufacturers do because they have multiple plants, warehouses or
sales offices. Thus, manufacturers with nexus in multiple states are
required by law to collect sales taxes on products drop shipped to
those states unless the distributor can produce a tax exemption
certificate.

To further complicate matters, certain states will not accept the
distributor's home state tax exemption certificate for products a
manufacturer drop ships there. In these cases, distributors should
secure a tax exemption certificate directly from those states and file
a copy with their manufacturer. Manufacturers that have physical
presence in multiple states have little maneuvering room. Lacking the
distributor's tax exemption certificate, the manufacturer is liable
for the state tax. If the manufacturer has a copy of the distributor's
tax exemption certificate for those states outside the distributor's
home state, the manufacturer will not be required to charge state
sales tax."

"How to Handle State Tax Exemption Requirements
IMR, (March 26, 1996) http://www.dmia.org/sol_center/taxes/handlestatetax.html

Search terms:

collecting florida sales tax; drop shipping "sales tax"
pabiz-ga rated this answer:4 out of 5 stars

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