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Georgia Drop shipping sales tax rules

By September 24, 2021Georgia Sales Tax

Georgia Drop shipping sales tax rules

E-commerce grew by 41% in 2021. The most popular question that I get is what is drop shipping and what are my sales tax obligations around drop shipping?

Drop shipping has 3 players – the end consumer, website owner/seller, manufacturer are the 3 parties. Let’s simplify this situation.
1. Do I have nexus?
2. Is what I am selling taxable?
3. How do I sell it (brick and mortar or website)?
4. Who took ownership at what time?

Start with nexus. There are 2 transactions. Determine the responsibilities between people. One between distributor and seller and then between seller and customer. The distributor invoices the seller, then seller invoices buyer.

The Universal Rule: Depending on nexus and taxability, sales tax is ALWAYs based on where it is shipped.

A drop shipment situation, it’s obvious that it’s resale. But it’s not a typical resale transaction because you’re not taking title of that property. Where do you provide the resale certificate is another issue? Not every state is alike because they don’t always treat the shipment the same, so the rules differ from state-to-state.

Georgia – What does the Peach State say:

Drop shipping and resale: Georgia dealers are not required to collect Georgia sales and use tax in a third-party drop shipment transaction when the purchased products are for resale. The purchaser must provide the seller with sufficient documentation that the product purchased is for resale purposes.

Charges made for delivery, transportation, freight, or shipping and handling are part of the sales price and subject to sales tax in the same manner as the underlying sale.

Georgia businesses only need to pay sales tax on out-of-state sales if they have nexus in other states. Nexus means that the business has a physical presence in another state.

Georgia Drop shipping sales tax rules

Ansari Law Firm

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