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


With expanded drop shipping programs, accounting departments must now configure and maintain internal accounting and ERP systems to reflect a sharply increased volume of tax regulations. They must ensure all certifications are current and stay on top of nexus requirements related to new drop ship partners.

“Some retailers outsource sales tax compliance, but often such companies specialize in general accounting or back office processing, not sales tax,” said Pete Bunio, Tax Research and Support Lead at Vertex. Others rely on the simple tax tables incorporated into some ecommerce solutions. Both put retailers at risk of compliance errors just as tax jurisdictions are stepping up scrutiny.

To cope with the growing complexity, the PwC report recommends organizations “implement a comprehensive approach to address these increased demands by streamlining internal processes around data and technology.”

A cloud-based sales tax management solution is emerging as the best practice to cope with the increasingly complex sales tax landscape.

An actively-managed cloud solution is backed by experts dedicated to researching sales tax laws, removing that growing task from retailer accounting staff. A well-crafted solution:

  • Tracks product taxability across 11,000 tax jurisdictions;
  • Maintains customer exemption certificates;
  • Ensures continuous compliance with sales tax laws;
  • Calculates sales tax down to granular levels, including district taxes;
  • Seamlessly integrates with ecommerce software such as Magento to quickly and accurately calculate sales tax for display in the customer’s cart;
  • Automates compliance documentation and filing; and
  • Frees up a retailer’s internal accounting staff for other tasks.

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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