Tax on dropshipping

[shopbeautyofpearl]

Hello so my dropship supplier says unless I get a exempt certificate in each state I ship to , I would be charged tax on the order of the customers state. Im exempt for Michigan. Was emailed any other states they would charge tax. But doesn't eBay collect taxes now?

If so for example an order is placed on eBay, eBay charges the tax of the customers state. I then take that money and order to my suppliers website to ship the item out and they charge taxes on the order again?

[tdumonde2014]

Your drop shopper has nothing to do with eBay and is required to collect taxes for those states that collect a tax.

[lja440]

"Hello so my dropship supplier says "

This is the root of your problem.  Drop shipping NEVER ends well. The Drop Shipper gets the lions share of the profit and takes not a single iota of the risk. 

You as the seller takes ALL the risk for a small percentage of the profit. The dropshipper will tank your reputation and go on to the next sucker never looking back. If they are out of stock, it's no skin off their nose, if they pack poorly, so what, you are there to take the fall.

List only what you have IN YOUR HANDS. You control everything and you get the profit. 

[puckbun_33]

Your supplier is a moron

[penguins_dont_fly]

@shopbeautyofpearl 

In all the states that have Facilitator Tax laws, eBay collects and remits the sales tax from your buyers.

Neither you or your supplier have anything to do with it.

Sales Tax is paid by the buyer, not the seller.

Tax help page for sellers:

https://www.ebay.com/help/selling/fees-credits-invoices/taxes-import-charges?id=4121

Tax help page for buyers:

https://www.ebay.com/help/buying/paying-items/paying-tax-ebay-purchases?id=4771

[luckythewinner]

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If so for example an order is placed on eBay, eBay charges the tax of the customers state. I then take that money and order to my suppliers website to ship the item out and they charge taxes on the order again?

Yes. Sales tax is a tax on a transaction, not on an item.

When you drop ship, there are two transactions: one between you and the buyer, and another between you and the dropshipper.

Unless you can prove to either eBay or to your dropshipper that the applicable transaction is exempt from sales tax to that state, then you may be paying sales tax on both of them. 

[portkoop-0]

Yup, now you have to pay taxes too.

They have also started charging me.

It's this new law, everyone has to pay taxes.

So when you buy you pay, I sell I pay, you pay, I pay, everyone pays.

Crazy, I know.

[shopbeautyofpearl]

Yes thank you.

[axiombody]

It sounds like you are buying an item that you sell which the buyer pays for.  So two buyers.  I think you can get a resellers license so the sales tax isn't charged when you personally buy an item to sell.  I use to buy from stores to resell.  Same idea I pay sales tax and then resell and the buyer again pays sales tax.   If I get the license to resell Burlington told me they won't charge me sales tax.  

[lja440]

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@portkoop-0 wrote:

Yup, now you have to pay taxes too.

They have also started charging me.

It's this new law, everyone has to pay taxes.

So when you buy you pay, I sell I pay, you pay, I pay, everyone pays.

Crazy, I know.

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Every little person has to pay taxes. Thanks to the new tax codes the big corporations pay little to no taxes.  It's called trickle down economics (aka "I'm important and you are not economics").

[russbrazil]

But penguins_dont_fly that is the whole issue

Imagine for a moment that you are a wholesaler, and you buy an item on ebay to resell it on another website, be it yours, or somewhere else.

So the point is, if you are reselling the item, it would be stupid to pay sales tax to ebay and then to have the end customer buy it from you and also pay sales tax for 2 obvious reasons. 1) There goes a big chunk of your profit and 2) sales tax was paid twice.

The question was very straightforward, I thought, and that is - how to get a license, be it wholesaler, be it sales tax or something, that would allow you as a wholesaler/reseller to not pay tax on items you are reselling. Now maybe it was not asked clearly enough, but that is the question, so that if you buy from eBay, Amazon, Walmart, Target or a manufacturer you do not pay sales tax on that platform and when you resell it then the final client pays sales tax. How is that done. Now, someone who knows this please answer. It is nice to get lots of opinions, but it is even better to get the answer of how to actually do it. Thank you. 

[russbrazil]

And luckythewinner, the whole point of the question was "how do you prove it" - repeating the obvious is interesting, but that simply restates the question and does not answer it. So, how do you prove it, so that eBay does not charge on that first transaction? What docs prove it? What license proves it? Obviously most "resellers/wholesalers" live in one state but more likely than not offer their products for sale in all 50 states (and by that I mean - hopefully not also restating the obvious - is that they are offering products being sold by others on one platform - for example ebay or Amazon or Walmart or Target - and advertising that product for sale on another platform - Shopify - Etsy - Walmart - Amazon - Target, wherever an arbitrage opportunity exists). 

[lepke1979]

It could be a thing with the state they're in or even how they're classified.

Haven't come across it myself. But I've heard of some suppliers requiring a resell certificate for the state they're in or the warehouse the stuff is going to. Usually attribute it to them being overly cautious or literal with the law. Or just dumb. But could be some other reason.

[russbrazil]

Yes, Portkoop-0, you are right, the goal was to ensure that everyone who should pay taxes does, but the whole point of the correct licenses is to either a) avoid double paying of sales taxes or b) have some way of reclaiming or getting credit for the double payment of sales taxes, for those legitimately engaging in wholesale/reselling or arbitrage between market places. Not all wholesalers/resellers are producers. Just like Sams Club and Costco make it fairly easy to have a tax exempt status because you are a restaurant, a distributor, etc., then eBay or Amazon or any of these other places should have something similar. While a tax exempt status you can walk into any Sams or Costco across the country and buy things tax exempt as long as it is reasonable that you will be using it in your business to sell it and collect sales taxes, it cannot be consumed by your business, it has to be resold in some form, easy when it comes to Gum, Water bottles, Beers, etc., a little more complicated when it comes to putting together lettuce, beans, rice, meat and tortillas, but the same goal of it being resold and therefore sales taxes collected on the end sale. 

[russbrazil]

Yes, correct, however, you most likely did it all in one state. What if you are buying, to give an example, tortillas from NV, beans from CA, lettuce from FL, meat from TX, tomatoes from LA, and potatoes from ID, and selling burritos in AZ. And by the way, whether it is food, or simply buying a bed frame on one marketplace and reselling it on another should not matter. There should be a way that is reasonable to buy everything and resell it somewhere else and not pay sales tax on the first transaction. That is how most wholesalers operate - they buy from many places and resell to many places. And some wholesalers (Sams and Costco included) sell to the public and collect sales taxes at the end point or sell online and collect sales taxes or sell to you (if you have a business) and you resell and collect sales taxes. Which goes back to the fundamental question - how do you do this - how do you prove to these marketplaces that you are the equivalent of one of these companies - what license or licenses do you need?