How to handle taxes when dropshipping from the US to the US as a Canad

Dropshipping taxes Canada US

[srDavicho]

Hi,

I have a Canadian company and I'm now opening dropship accounts with US suppliers to target the US market. Which means I sell their products on my website, and once product is ordered, I go back to them, buy the product and they ship it for me with my Canadian company name on the shipment.

My question; How do I handle the sales taxes? As a Canadian company selling in the US, the US customers would generally pay the customs fees & taxes, but since it never cross the border, I wonder how to deal with it.

Any help please?

[Rugles]

That is an excellent question for your Accountant. They will provide you with the best answer.

That is how we handled that very same issue and we sleep soundly at night.

(not trying to be snarky, but a message board is a poor place to get tax and legal advice)

[srDavicho]

I will do it and would certainly double check any information obtained here with my accountant, thank you.

If anyone is in a similar situation tough and is willing to share its experience, I would be pleased to hear it.

Good day!

[lgn1]

This can get complicated and involves matters of Nexus. Each state has different rules for Nexus, and some actually have specific rules on drop shipping.

When it comes to tax law, the USA is actually composed of 50 fiefdoms all run by feudal lords, who can't agree on internet sales tax harmonization; despite 10 years of trying.

Ask yourself this:

1) Do you or your business own any property or assets in the USA?

2) Would paying double or triple the tax owing in a particular state, if that state did decide to come after you be a hardship?

3) Is your dropshipper charging you tax?

4) Are you a major player in the US market?

5) Do you see the world in black and white only, with no shades of grey?

If the answer to all these questions are no, then you can probably ignore this whole issue; and can also sleep at night.

If the dropshipper is charging you the state sales tax, then just collect the percentage tax from the same state(s) that the drop shipper is collecting from and register and collect and pay the taxes due for those states.

If the dropshipper is not collecting the proper taxes, the tax department are going to go after them; since they have alot more leverage with them than a foreign company.

[srDavicho]

Thank you Ign1 for your post, I really appreciate!

Tax harmonization would make thing so much easier...! When starting a new company, managing all these "by state" rules, make things really complicated, especially considering that new businesses don't have the financial & professional resources required to handle all that.

Well thank you for your advice and have a good day!