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Tax for a non-US company selling inside the US
AffiliateDreamer

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 3343900 posted 1:25 pm on May 19, 2007 (gmt 0)

If I am from Canada, and I use a fulfillment company to sell products inside the US. Do I have to charge ANY tax at all? What i've seen is that companies charge tax for any purchases made by people who live in the SAME state as the company.

Comments?

 

Ledfish

10+ Year Member



 
Msg#: 3343900 posted 2:07 pm on May 19, 2007 (gmt 0)

I'm not a 100% positive on this one, but I would think you'd have to charge and pay sales tax on any sales in the same state that the fullfilment company is located in.

In the US, a company has to charge sales tax to any end user customers in states where the company has "Nexus" which means a physical presence. Hardgoods at a fulfillment location would qualify as a physical presense or "Nexus".

Also since you have "Nexus", you would also be required to comply with that states business regulations and any othewr taxes that may be applicable like business income tax.

lgn1

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 3343900 posted 3:28 am on May 21, 2007 (gmt 0)

We are in the same boat, however we have a policy that we do not collect tax for foreign governments, and our website indicates that any sales or use tax (if any) is the responsibility of the customer.

Now saying this, our drop shipper is in a low population state and we get very little customer buisness from this state, so if the state ever came collecting over Nexus, then our exposure would be small.

If you are just staring out, I wouldn't worry about foreign tax law. However as you get bigger you may have to start to worry about these things.

If your drop shipper is in Delaware, Alaska, Oregon or Montana, these states have no state sales tax, so this is not an issue.

julesn

5+ Year Member



 
Msg#: 3343900 posted 8:40 pm on May 21, 2007 (gmt 0)

The liability isn't just state / sales tax. You could also be responsible for Federal Business Income taxes if the IRS deems that you have a nexus in the US etc..

lgn1

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 3343900 posted 12:11 pm on May 22, 2007 (gmt 0)

The IRS does not operate on the prinicple of NEXUS, they operate on the principle of "business presence".

The IRS does not consider "Drop Shipping" from a US supplier business presence.

So if you are just drop shipping, then there are no IRS related issues, and you are not liable to the IRS for taxes.

If we are splitting hairs, there is one other tax liability issue. Some cities and municpalities in the USA charge a surtax on the state tax, and this could create a liability.

I rememeber a few large US cities in the USA were trying to go after the large travel companies (expedia, etc)for these taxes. Of course the travel companies are fighting this, and I don't know the status of this in court.

Rugles

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 3343900 posted 8:39 pm on May 22, 2007 (gmt 0)

>>>any sales or use tax (if any) is the responsibility of the customer

That is how you handle it. Just put that on your website.

ispy



 
Msg#: 3343900 posted 6:22 pm on May 23, 2007 (gmt 0)

I'm not sure that the nexus qualifies as your business presence if you hire for their services, unless you are paying them as employees.

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