USing a US dropshipper outside of the US?

Do I have to collect sales tax?

[chodges84]

Hi All,

I've been neotiating with an American supplier of some goods of mine. I'm looking to set up a site aimed at the USA with orders dispatched from the supplier direct to the customer (i.e. dropshipping).

What I need to know though is whether I need to collect sales tax. As far as UK VAT is concerned, I'm ok. As the goods are sold to someone outside the EU I don't have to charge VAT and, as the goods never enter the EU I won't be charged VAT and duty by HMCE.

I've read a few threads on US dropshipping and it seems that the rules are vague. So presumably, mine are a bit more complex?

Does the supplier charge slaes tax based on delivery address or invoice address. If it's invoice address, I should be OK. I am outside the US and won't have to pay sales tax. As I am then selling to someone in the US, I don't have to charge sales tax?

However, if sales tax is based on delivery address, the supplier would have to charge me when sales tax arises. Presumably I must then charge the customers that need to be charged, or swallow the tax, but still declare it to the correct authorities.

Has anyone else done this, or something similar that could advise?

Thanks in advance.

[ispy]

Suppliers who drop ship do not charge businesses tax.

[Barb]

That is correct. Drop shipping is the same as buying wholesale - it's just it's shipped to your customer instead of to you.

So, since you are buying wholesale from your supplier, there is no sales taxes involved there.

However, between you and your customers .... ummmm gee, that is a toughy. You may want to contact solicitors or accountants in your area and see if they may know the laws (or able to point you to the right folks who do).

I would have to imagine there is some sort of law in place that sales tax would have to be collected...

[drhfinegifts]

I believe you would need to charge sales tax based upon:

1. Where your dropshipper is located, and
2. Where the customer is located.

In other words, if the dropshipper is located in say, Texas, any shipments going to customers in Texas would need to be charges Texas Sales & Use Tax.

However, each state has different rules regarding sales tax, but this is generally how sales taxes are applied. It is based upon the 'physical location' of where the goods are shipped from.

I would clarify all this with your dropshipper. If they are reputable, they should know their local tax laws.