How to determine Nexus in Dropshipping

By December 3, 2021December 5th, 2021Sales Tax

How to determine Nexus in Dropshipping:

In a drop shipping setting, just keep in mind that there are 3 players:

1. Seller
2. Dropshipper (distributor)
3. Customer

The general rule: Sales tax is collected at the end-state of the sale, where the customer resides.

Note: If the Dropshipper has Nexus, but the Seller does not, then, the seller does not charge sales tax to its customers. *The Dropshipper would charge the seller sales tax, unless, the seller has a resale certificate.

How to determine Nexus in Dropshipping

Dropshipper has Nexus Dropshipper does NOT have Nexus
Seller has Nexus
  • Dropshipper charges Seller tax, unless there is a resale certificate.
  • Seller charges its customer tax
  • Dropshipper does NOT charge Seller tax
  • Seller charges its customer tax
Seller does NOT have Nexus
  • Dropshipper charges Seller tax unless Seller has a resale certificate.
  • Seller charges customer tax
  • Dropshipper does not charge you tax
  • Seller does not charge its customer’s tax

How to determine Nexus in Dropshipping

Ansari Law Firm

Author Ansari Law Firm

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