Sales Tax for Drop Shipments

Say Company A in California sells to Company C in Florida. Company A buys product from Company B in New York and asks them to drop ship to Company C in Florida.

In this situation Company B is coming back to their Customer A and saying that they must charge sales tax unless they get a Florida sales tax certificate for Company C. Is it right that Company B has liability for the tax based on shipping address alone, and not on the billing address?

This situation is ripe with opportunity for other problems. Imagine a case where Company C was an end user who needed to be charged tax. Company B under their proposal would end up charging the tax to Company A, who is not based in Florida. Company A could not pass that tax to Company C because Company A has no nexus in Florida and does not file sales tax returns there. Company C could well end up declaring the item with Use Tax because its invoice from A has no sales tax. You end up with the tax being paid twice (by A and C) and A ends up not able to pass on that added expense.

Is there a way to reconcile this with Company B's requirements?

Reply to
W
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If New York and Florida have a mutual sales tax compact, then yes.

(I do not know this is the case, but it is not out of the question.)

Use tax returns have an adjustment for tax already paid in other states. The chain of vendors may or may not have an information reporting requirement to the filer of the use tax (the ultimate buyer). It is up to the buyer to obtain the information/documentation he needs to minimize his use tax.

Steve

Reply to
Steve Pope

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