New Use Tax Guidelines for Resellers: Drop Shipments

Oct 30, 2019

As you know, WS Display offers a drop shipment service that blind ships orders directly to your customer on your behalf. Meaning, we print your business name and address on a label and place it on the box as the return address and your customer’s information is placed as the shipping address. And if you desire to utilize this service, it is via request.


As many of you know we are located in a number of states. The California Department of Tax and Fee Administration, the Pennsylvania Department of Revenue and the State of Hawaii Department of Taxation requires us to collect use tax on purchases shipped to each of their states. Since the South Dakota Vs Wayfair ruling in the Supreme court of the Unites State ruled in favor in the State of South Dakota on June 2018 we are also now required to collect sales tax on a total of 18 different states. This means that we are to collect sales tax on all orders drop shipped on our customers behalf unless we are provided with a copy of a state approved resale certificate of each destination state. Out of state retailers are liable for any tax due.

What does this mean for you?


If you request a drop shipment to your customer whose shipping address is located in the states noted below and your place of business is located outside of one of these states, then you are required to pay use tax. *To file for exemption from paying use tax at the time of purchase, you must obtain and submit to us a reseller’s certificate for the state in which the drop shipment is going. To self-report use tax, you will need to apply for a Certificate of Registration-Use Tax on each corresponding state. Please also reference each state section below for detailed information about each state and their requirements.

States to charge tax for Drop Shipments - Click each state to see more details
I have already submitted a copy of my Seller's Permit, is this sufficient to be sales tax exempt?
A seller’s Permit is not a buying permit. You will still have to pay tax on all items you use rather then sell in your business (Such as office supplies)

What is the difference between a Sellers Permit and a Reseller Certificate?
A seller’s permit is a State issued document that allow businesses to make sales in California. Once you have a seller’s permit, you may issued resale certificates to your suppliers to buy items you will sell in your business Operations. Issuing a resale certificate allows you to buy these items without paying tax to the seller.

I am an out of state reseller why do I need to pay sales tax to CA?
Since we currently have a nexus in the state of California, the state requires us to collect sales tax on all drop shipments to the state of California on our clients behalf unless our clients is registered with the state of California and possesses a Valid California Resale certificate.

Where can I get more information about the drop shipment rules?
You can review the drop ship rules for the state of CA by visiting their website Publication 121, Drop shipments
To contact the California Department of tax and Fee Administration, please call their toll free number 1-800-400-7115 Or visit CDTFA website

How do I apply for a CA reseller Certificate?
You can register for a Certificate of Registration-Use Tax by going to the California Department of Tax and Fee Administration

Example of CA Resale Certificate Form

You can also reach out the California Department of Tax and Fee Administration for further questions by calling their toll Free number 1-800-400-7115

I just obtained a California Reseller Certificate, can you refund the sales taxes I paid a 1 month ago?
Unfortunately we are unable to refund it for you as the sales tax has already been submitted to the state of California on your sales.

I just obtained a California Reseller Certificate, can you refund the sales tax I paid yesterday?
A Copy of the except certificate must be provided prior the order is finalized and invoiced, If the order hasn’t been invoiced then it can be adjusted and refunded. Unfortunately once an order has been finalized we are unable to refund the sales tax.
What does the Drop ship rule states?
For all Drop shipments we are required by the state of California to calculate the retail selling price of all drop shipments of property based on its selling price of the property to the true retail plus a markup of 10 percent (10%) On to which sales tax will be collected.
Example
If the drop shipper knows the California consumer purchased the merchandise for $250, tax should be based on that amount. However, if a drop shipper charges a true retailer $200 and does not know the selling price to the California consumer, the drop shipper should report and pay tax on a retail selling price of $220 ($200 +10% markup of $20 = $220)
More Information,click here
How long is a California reseller certificate good for?
California reseller certificate do no have an expiration date and they are good until each company decides to close the account with the State.

Why does the state wants us to calculate sales tax based on a 10% markup?
The state of California believes that when out of state clients have products drop ship to the state of california by a California Vendor, they are selling the product at a higher cost then what the vendor sold it to for resale. The state of California states that drop ship companies need to collect sales tax based on the retail cost to the California consumer, however if the retail cost is not known by the drop shipper, the state will accept that the drop shipper calculates the sales tax based on a minimum markup of 10% from the originally purchased. By calculating this markup they believe the out-of-state vendor is paying a more fair sales tax to the state of California.

Who is Affected by this California Drop ship rule?
This rule only affects out of state clients with no California reseller certificate on file and who wish for us to drop ship their Sales order within the state of California.

I am an out of state reseller why do I need to pay Sales tax to Georgia Drop ship orders?
WSDisplay currently has a presence in Georgia, we’re required by law to tax all orders dropped shipped to Georgia, unless you provide a state resale Certificate

Does the state of Georgia accept out of state resale certificates for my sales purchases to be tax exempt?
Yes, At the time of publication the state of Georgia would accept the following Certificates for sales tax exemption.

  • • Georgia Resale Certificate ST-5
  • • SST Exemption Certificate
  • • Resellers Own State Resale Certificate.


For more information about this publication please click here

I am an out of state retailer, Can I apply for my own Georgia resale Certificate?
Yes, you can but we recommend you to look at their site to see if you qualify for economic nexus status before applying. https://dor.georgia.gov/out-state-sellers

Where can I get more information on Georgia Nexus?
You can get information on economic nexus by calling the state of Georgia at 877-423-6711 or by using the link below https://dor.georgia.gov/out-state-sellers

What does the Georgia Exempt Certificate looks like?
This is a sample of Georgia Resale Certificate


What is GET?
GET is General Excise Tax collected by the state of Hawaii

How much GET do you collect for drop shipments to Hawaii?
Since we provide wholesale services on our goods and manufacture we collect a 0.5% GET

If I am a non Hawaii resident can I apply for a Tax Exempt Certificate in Hawaii?
Currently Hawaii does not issue tax exemption certificates to tourist or other non residents to exempt their purchases from Hawaii Businesses.

Would the state of Hawaii accept my out of state reseller certificate?
No, currently Hawaii does not accept any out of state reseller certificate for GET exemptions.

Required sales tax Exemption certificates for Drop shipments to nexus states (CA, PA, HI)
I am an out of state reseller why do I need to pay sales tax in the state of Indiana?
Since WSDisplay currently has nexus in the state of Indiana, the state requires us to collect sales tax on all drop shipments to the state unless they provide an Indiana Resale Certificate, FORM ST-105, or SSTGB Form F0003, and Registered Retail Merchant Certificate (RRMC) - sales permit.

Does Indiana accept my out of state resale certificate for my resale purchases to be tax exempt?
At the time of publication, Indiana has said they will not accept your resale certificate by itself however they will accept your resident State business license number or State issued resale certificate number if you complete their form ST-105 only then your purchases can be sales tax exempt.

Where can I download the Indiana Exemption Certificate?
FORM ST-105 Can be downloaded using the link https://www.in.gov/dor/3504.htm

Which sections of Form ST-105 do I need to fill out?
Please see all sections highlighted
IndianaTaxCert


If I do not submit a ST-105 to WSDisplay, how much sales tax do I need to pay for my drop ship orders to the state of Indiana?
The sales tax for the state of Indiana is 7% across the state.

What is taxable in the state of Indiana?
Sales tax applies to all Tangible Personal Property, Labor as well as Shipping and Handling.

Where can I get more information about what the laws are for remote sellers in the state of Indiana?
You may visit the Indiana website https://www.in.gov/dor/6367.htm Or call the state at 317 233-4015


I am having WSDisplay Dropship my order to the state of Kansas, Why am I seeing sales tax on my order?
WSDisplay is obligated to collect and remit taxes in the state of Kansas and is required by law to tax all orders dropped shipped to the state unless we are provided with an acceptable tax exempt form. If you are seeing sales tax it means that we do not have an acceptable tax exempt form for you or your company in our records.

What Tax exempt forms does the state of Kansas require buyers to provide WSDisplay for my dropship orders to be sales tax exempt?
Currently the state of Kansas accepts the following forms as acceptable sales tax exemption documents.
  • • Kansas residents need to provide form ST-28A
  • • Kansas Exempt Entities and wholesale companies please provide
  • PR78 SSTA
  • • Out of state Drop shippers please provide ST-28A or PR78 SSTA

I am not a State of Kansas Business, Would the state of Kansas accept my own state Resale Certificate?
Per the Kansas Department of Revenue, They would not accept your home state resale certificate form however they would allow you to complete their Resale Exemption certificate ST-28M or PR78SSTA with your home state exemption number for sales tax exemption.

If I do not provide WSDisplay with any of the documents above, what would be the sales tax rate that I must pay to the state of Kansas?
The state of Kansas sales tax ranges between 6.5% to 10.5%. For detailed information please visit the Kansas Department of Revenue


If I have further questions about the state of Kansas New Nexus Threshold where can I get more information?
You may visit the Kansas Department of Revenue or Call them at 785-368-8222 for further clarification.
I am an out of state reseller why do I need to pay sales tax in the state of Kentucky?
Since WSDisplay currently has nexus in the state of Kentucky, the state requires us to collect sales tax on all drop shipments to the state unless they provide a Kentucky Resale Certificate or complete their FORM 51A105.

Does Kentucky accept my out of state resale certificate for my resale purchases to be tax exempt?
At the time of publication, Kentucky can not accept your resale certificate by itself however they will accept your resale number if you complete their form 51A105 only then your purchases can be sales tax exempt.

Where can I download the Kentucky Exemption Certificate?
FORM 51A105 Can be downloaded using the link https://revenue.ky.gov/Forms/51A105%20(7-19).pdf

Which sections of Form 51A105 do I need to fill out?
Please see all sections in red that would need to be filled out.

If I do not submit a FORM 51A105 to WSDisplay, how much sales tax do I need to pay for my drop ship orders to the state of Kentucky?
The sales tax for the state of Kentucky is 6% across the state.

What is taxable in the state of Kentucky?
Sales tax applies to all Tangible Personal Property as well as Shipping and Handling.

I am an out of state reseller why do I need to pay sales tax to Maryland?
Since WSDisplay currently has economic nexus in the state of Maryland, the state requires us to collect sales tax on all drop shipments to the state of Maryland on our clients behalf unless we are provided with a Maryland resale certificate.

Does the state of Maryland accept my out of state resale Certificate for my sales purchased to be tax exempt?
No, currently Maryland does not allowed out of state resale Certificate as proof for sales tax exemption. Maryland will only accept their own state resale Certificate.

I am an out of state retailer, Can I apply for my own Maryland Resale certificate?
Yes, you can but we recommend you to look at their site to see if you qualify for economic nexus status before applying.

Where Can I get more information on Maryland Nexus?
You can get more information on economic nexus using the link below Maryland: Economic Nexus Or going through their website at www.marylandtaxes.gov

What does a Maryland Exempt Certificate look like?
This is the sample of Maryland Resale Certificate link. HERE.

Which sections of the certificate need to be filled out?
Please see highlighted section on the Maryland Sales and Use Tax Resale Certificate sample below.
I am having WSDIsplay Dropship my order to the state of Michigan, why am I seen sales tax on my order?
WSDisplay currently has a presence in the state of Michigan and we are required by law to tax all orders dropped shipped to the state of Michigan unless provided with an acceptable tax exempt form. If you are seen sales tax it means we do not have an acceptable tax exempt form for you or you company on our records.

Which Tax exempt form does the state of Michigan required I provide WSDisplay for my dropship orders to be sales tax exempt?
Currently the state of Michigan would accept the following forms as acceptable sales tax exemption documents




If I choose not to provide any of the sales tax exemptions above what is the sales tax rate for the state of Michigan?
The current sales tax rate is 6% across the state

Where can I send my sales tax exemption form so no sales taxes are charges on my Drop-Shipped orders to the state of Michigan?
You may forward a copy of your Blanket resale certificate to info@wsdisplay.com so we can update our system and no tax would be charged on future orders. Please keep in mind that a blanket resale certificate is valid for a four years period so you may be asked once this period has expired.

Where can I obtain further information about MIchigan sales tax and nexus?
You may visit the state website https://www.michigan.gov/taxes/ or contact the state via phone at 517-636-6925*

I am an out of state reseller why do I need to pay sales tax in the state of New Jersey?
Since WSDisplay currently has nexus in the state of New Jersey, the state requires us to collect sales tax on all drop shipments to the state unless they provide a New Jersey Resale Certificate.

Does the State of New Jersey accept my out of state resale certificate for my resale purchases to be tax exempt?
At the time of publication, the state of New Jersey will accept the following documents for sales tax exemption.

  1. 1. Resale Certificate from New Jersey (ST-3)
  2. 2. Resale Certificate for Non‐New Jersey Sellers (Form ST-3NR )
  3. 3. Uniform Sales & Use Tax Certificate – Multijurisdiction published by the Multistate Tax Commission
  4. 4. Streamlined Sales and Use Tax Certificate of Exemption (Form ST-SST)
  5. 5. Purchaser’s out of state resale Certificate (When Dropshipping to the state Only from an out of state reseller)


If I am an out of state reseller who is having WSDisplay drop ship my sales to the state of NJ what do I need to submit WSDisplay for my order to be tax exempt?
If you are an out of state reseller having Wsdisplay drop ship to your New Jersey customer, the state of New Jersey would accept your state issued exemption Certificate as long as it is valid.

If I do not submit any of the forms above to WSDisplay, how much sales tax do I need to pay for my drop ship orders to the state of the state of New Jersey?
The sales tax for the state of New Jersey is 6.625% across the state.

What is taxable in the state of New Jersey?
Sales tax applies to all Tangible Personal Property as well as Shipping and Handling.

Where can I get more information about Sales tax information for remote sellers?
You may contact the State of New Jersey Department of Treasury by phone, email or writing. Here is a link to their contact page https://www.state.nj.us/treasury/taxation/email.shtml

I am having WSDIsplay Dropship my order to the state of North Carolina, why am I seen sales tax on my order?
WSDisplay currently has a presence in the state of North Carolina and we are required by law to tax all orders dropped shipped to the state unless provided with an acceptable tax exempt form. If you are seen sales tax it means we do not have an acceptable tax exempt form for you or you company on our records.

I am not a State of North Carolina Business, Would the state of North Carolina accept my own state Resale Certificate?
At this time the state of North Carolina would require out of state resellers to complete the Streamlined Sales and use tax agreement Certificate of Exemption(Form E-595E) with a valid state issued registration number of your home state. Only then the state would allow the sales order to be tax exempt.

What documents would the state of North Carolina accept for sales tax exemption?
Currently the state of North Carolina would accept the following documents as acceptable sales tax exemption forms:


  • • Streamlined sales and use Tax agreement Certificate of Exemption with a valid sales and use tax registration number or exemption number(Form E-595E)
  • • Multijurisdiction Uniform Sales and use tax Certificate (MTC)


Where can I download the Streamlined sales and use tax agreement Certificate of Exemption? (Form E-595E)
This form can be downloaded from the North Carolina Department of Revenue or using the link here https://files.nc.gov/ncdor/documents/files/e595e_2017121417_webfill_v2_0.pdf

If I do not provide an acceptable sales tax form exemption to WSDisplay what is the sales tax rate, I would have to pay?
North Carolina has a Destination based tax, currently the tax for the state would be 4.75% Plus county base tax rates that vary depending on local municipalities.

Where can I forward my state approved tax exempt form so you may remove the sales tax for orders going to the state of North Carolina?
You may email us your completed Form E-595E to info@wsdisplay.com

Where can I obtain further information about North Carolina sales tax and nexus?
You may visit their website https://www.ncdor.gov or call the state general information line at 1-877-252-3052
I have a California resale certificate but I need you to drop ship my product to my customer in Pennsylvania, Why do I need to pay Pennsylvania Sales tax?
WSdisplay currently pays sales taxes in states where we are required to collect sales tax on all drop shipments. Since Pennsylvania is one of our nexus states, we are required by the state of Pennsylvania to collect sales tax on all product ship to a Pennsylvania address unless our client provides a valid Pennsylvania resale certificate Or fill out the Pennsylvania Exemption Certificate and submit this to us.

Does Pennsylvania accept my out of state reseller certificate for my sales purchases to be tax exempt?
Pennsylvania would accept an out of state reseller certificate in good faith given that purchasers fill out their form REV-1220 and submit this to their vender and explain the reason for their exception.

Where can I download a Pennsylvania Exempt Certificate?
REV-1220 form can be downloaded it using the link HERE.

If I do not submit an REV-1220 form to WSDisplay, how much tax do I need to pay for my drop ship orders to the State of Pennsylvania?
Pennsylvania is an origin-base sales tax state, which means sales tax rates are determined by the location of the vendor. Our location base tax in Carlisle PA is 6%.

Where can I get more information about the drop shipment rules?
You can call the Office of Chief Counsel at 717-787-1382 or email RA-nexus@pa.gov and talk to a Pennsylvania state lawyer.
PENNSYLVANIA: NEXUS RESOURCES FOR RETAILERS

Which sections of REV-1220 need to be filled out if I am an out of state customer?
Please see highlighted section on the Pennsylvania Exemption Certificate sample on page 7

What is Taxable in the state of Pennsylvania?
Sales tax applies to all tangible personal property as well as Shipping and Handling.
I am having WSDisplay Dropship my order to the state of Texas. Why am I seeing sales tax on my order?
WSDisplay is obligated to collect and remit taxes in the state of Texas and is required by law to tax all orders dropped shipped to the state unless we are provided with an acceptable tax exempt form. If you are seeing sales tax it means that we do not have an acceptable tax exempt form for you or your company in our records.

What Tax exempt forms does the state of Texas require buyers to provide WSDisplay for my dropship orders to be sales tax exempt?
Currently the state of Texas accepts the following forms as acceptable sales tax exemption documents.
  • Texas Resale and Exemption Certificate Form 01-339
  • Uniform sales & Use tax exemption/Resale Certificate (MTC) along with a copy of your state issued resale certificate (2 documents) (For out of state customers)

I am not a State of Texas Business, Would the state of Texas accept my own state Resale Certificate?
The State of Texas only allows a Texas business resale number and an authorized federal Taxpayers register number for retailers based in Mexico. Unfortunately if you are not registered in the state of Texas, Texas would not accept your out of state resale certificate for sales tax exemption and sales tax would need to be collected.


If I do not provide WSDisplay with any of the documents above, what would be the sales tax rate that I must pay to the state of Texas?
We will be collecting the required 8% sales tax.

How do I fill out the Texas Sales and Use tax Resale Certificate?
When the form is downloaded it downloads 2 pages, for resellers please print page #1, page#2 only gets filled out by sales tax exempt organizations such as non profit, government etc



The following states are coming soon as nexus states.
  • Arizona
  • Arkansas
  • Connecticut
  • Iowa
  • Massachusetts
  • Missouri
  • Nebraska
  • New York
  • Ohio
  • Oklahoma
  • South Carolina
  • Utah
  • Wisconsin


*If you do not submit a reseller’s certificate, but you need us to drop ship to any of the states mentioned above, then we will collect tax at the time of the order. Please keep in mind that tax for orders shipping to California will be calculated at a 10% mark up and combined sales tax rates in California range from 7.25% to 10.25% - please see the Examples section below. Orders shipping to Pennsylvania will be charged tax at a 6% rate. Orders shipping to Hawaii will be charged tax at a 0.5% rate. Orders shipping to Maryland will be charged tax at a 6% rate.

Ex. 1 Your business is based in Nevada. Your customer is located in Carlsbad, California and you request we drop ship it to them. At the time of order, you will be charged tax at Carlsbad’s rate of 7.75% based on a 10% markup of the product. The product will not be marked up for your order; only the taxes due is based on a 10% markup of the product and on the city tax rate. If you submit to us a California reseller’s certificate, then you will NOT pay us any tax.


Ex. 1.a. - Let’s say the WSDisplay price for example product is $100, and it drop ships to Carlsbad, CA. Carlsbad tax rate is 7.75%.

$100 x 1.1% (10% markup) = $110.00
$110.00 x 7.75% = $8.53
$100 (wholesale price) + $8.53 (tax due) = $108.53


Ex. 2 Your business is based in New York. Your customer is located in Harrisburg, PA and you request we drop ship it to them. At the time of order, you will be charged tax at Harrisburg rate of 6% tax. If you submit to us a Pennsylvania reseller’s certificate, then you will NOT pay us any tax.


Online Submission

1. You should get an email from us requesting missing certificates. (If not, please email us at info@wsdisplay.com or call us at (800) 640-9544.)
2. Within the email, click the direct link to login to Avalara CertCapture.

3. After logging in, you can select either fill out online form or upload a copy of your certificate.

View Your Status

To view your status, simply login back into Avalara CertCapture. Again, use the direct link that can be found in the same email we sent you for your online submission.

Who is Avalara?
Avalara is a software for automated tax compliance whom we have partner with to collect and record sales tax.

What does it mean to have a Nexus
Nexus is a legal term that refers to the requirement for companies doing business in a state to collect and pay tax on sales in that state. A nexus can be created by having a physical presence in the state, having employees. In some cases, however, the use of a drop shipper or a contract with a distributor that functions as a drop shipper is considered a taxable nexus creating activity.

What does Blind Drop-ship mean?
Blind Drop-ship is the action of moving goods from the manufacturer directly to the retailer without going through the usual distribution channels. As a result, the merchant never sees or handles the product.

How is the Sales tax going to be calculated?
The sales tax will be calculated by Avalara who is comprised of Avatax and Certcapture

How would Avalara calculate the sales tax rate?
Avalara will look for a copy of a reseller certificate under the CertCapture website, this is a site for Certificate records to be logged and match to each client. If a client has a certificate for the ship to state on file, avatax will not calculate any sales tax but if there isn’t any certificate on file then a tax rule will be applied based on the drop-ship state.

Which States do not accept Out-of-state resale Certificates?
California, Florida, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, Washington, Washington D.C.

For more information regarding drop shipments or how to obtain a reseller’s certificate or certificate of registration-use tax, see links below.

CaliforniaToll-free: 1-800-400-7115
Outside the US: 1-916-445-6362

PennsylvaniaBusiness Taxes: 1-717-787-1064

HawaiiTaxpayer Services: 1-808-587-4242
Toll-free: 1-800-222-3229

MarylandMaryland Comptroller’s Office: remotesellers@comp.state.md.us
Toll-free: 1-800-MD TAXES



Georgia Georgia Economic Nexus: Toll-free: 1-877-423-6711

Indiana Georgia State: TEL: 1-317-233-4015

New Jersey New Jersey State: TEL: 1-317 233-4015

Michigan Michigan State: TEL: 1-517-636-6925

North Carolina North Carolina State: Toll-free: 1-877-252-3052

Texas Texas State: TEL: 1-800-252-5555

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