There doesn't seem to be a tax professional who agrees on one answer, so I would like hear what the general consensus is on our Tax scenario.
We are a new drop shipping company headquartered in Alpharetta, GA. We only have Nexus in the State of Georgia.
We resell through several manufacturers and distributors who are all located in the US. These states include Georgia, New Jersey, California and Illinois.
We’ve provided each of our manufacturers and distributors with a State of Georgia resale certificate.
We plan to ship to every state in the US including Washington DC and Puerto Rico.
Because we have Nexus in Georgia, we plan to collect tax from customers in Georgia. What other States do we have to collect taxes in and what States do we need to register with so that we can be in compliance with those States to collect tax?
We plan to use TaxJar...
Hey Craig! Marc from TaxJar here. Figuring out sales tax for Drop Shipping is about as complicated as it gets so I feel your pain. To help you get your sales tax obligation sorted out, I recommend reading TaxJar's free Online Seller's Guide to Drop Shipping Sales Tax.
But in short, you are correct that you'll need to collect sales tax in Georgia because your nexus.
As for destination states where your vendor has nexus but your company does not, it again sounds like you're doing it right and providing resale certificates to all vendors. But please read through the whole guide to make sure.
Good luck and feel free to reach out to firstname.lastname@example.org if you have any questions.
In case anyone is interested, here is what I learned from a conversation with the Corporate NEXUS group for the state of NJ.
Since we do not have NEXUS in NJ, we are not responsible for collecting sales tax.
Separate to Sales Tax, since we will derive part of our revenue from the State of NJ from consumers who buy from us, we must register and pay a Corporate Business Tax to the state of NJ. This tax is based on our annual revenue for sales to consumers in NJ.
I plan to research this by calling each state individually to inquire on their specific requirements. Or, I could just hire an Accountant who specializes in this and save myself a lot of time.
S Corporation- MINIMUM TAX (Tax Year 2007 – Forward):
The minimum tax is assessed based on New Jersey Gross Receipts:
Less than $100,000
$375.00$100,000 or more but less than $250,000
$250,000 or more but less than $500,000
$500,000 or more but less than $1,000,000
$1,000,000 or more
The minimum tax is assessed based on the New Jersey Gross Receipts (Schedule A-GR) as follows: provided however that for a taxpayer that is a member of an affiliated or controlled group (as per sections 1504 or 1563 of the Internal Revenue Code of 1986) which has a total payroll of $5,000,000 or more for the return period, including periods beginning on or after January 1, 2012, the minimum tax shall be $2,000.
Total payroll refers to the total payroll of the affiliated group rather than total New Jersey payroll of a single corporation. Taxpayers that are members of an affiliated or controlled group must submit a schedule of payroll per member and a copy of the taxpayer’s federal affiliations schedule, Form 851, with the return. Refer to Schedule A-GR for the determination of New Jersey gross receipts.
Tax periods of less than 12 months are subject to the higher minimum tax if the prorated total payroll exceeds $416,667 per month.