Msg#: 3809497 posted 2:15 pm on Dec 17, 2008 (gmt 0)
I know this has been discussed before, but I could not find this scenario by searching the forums.
1. I am located it SC. I do not have nexus in CA. 2. I sell items online to a customer in CA. 3. I buy and drop ship the items from a distributor that has nexus in CA. 4. I pay sales tax when the distributor drop ships to a the CA address. 5. When the distributor does not have the items in stock, so they drop ship from the manufacturer in OH who does not have nexus in CA. 6. The distributor still charges me sales tax even though I have a reseller tax exemption on file with them. 7. If I order from the manufacturer directly in OH and they drop ship to CA, then I do not get charged sales tax. 8. When I order from the distributor and then they order from the manufacturer, isn't that the same as me ordering directly from the manufacturer?
Msg#: 3809497 posted 11:37 pm on Dec 17, 2008 (gmt 0)
The usual disclaimers about not being a tax expert apply here.
7. Correct, incoming items to your state dont have to be taxed from the company sending them (New York state issues aside for now). You should collect tax from customers who have products delivered in your state. This tax gets paid to the state on your business tax returns.
4. Incorrect, the reseller tax certificate should exempt you from paying tax when you are buying the items for resale.
If the distributor insists on charging you tax:
On your state tax return you can deduct the full cost of the items (minus tax) under tax paid purchases resold prior to use. This probably has some audit flags somewhere if done in quantity however.