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The 5 W’s of Drop Shipping Tax Rules: When?


Sales tax rules also can be time-based. Governments periodically hold sales tax holidays, eliminating or reducing taxes for some period. Retailers must implement and document these events.

Taxable items and exemption rules also vary. “Clothing may be tax exempt — except for some items that are not,” said Pete Bunio, Tax Research and Support Lead at Vertex. “It’s on the retailer to correctly identify those items.” And some customers are exempt because they are non-profits or part of government, such as teachers purchasing school supplies. As with resale certificates, some states will accept other states’ tax exemption certificates, and others will not. These laws, too, vary widely and are under pressure as jurisdictions seek to replace declining revenue.

Small- to mid-sized and fast-growing companies in particular are in a double bind regarding sales tax nexus: they’re sizable and busy enough to find themselves in the increasingly broad sights of local tax officials, but they typically lack the expertise and means to minimize their tax liability and audit exposure, according to Diane Yetter and Sales Tax Institute.

To learn more how Vertex Cloud can help navigate your company through the complexities of taxes through drop shipping process, schedule a demo now.

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