Confusion About Dropshipping Tax Liabilities

[CC02]

Hi,

So this is my second attempt at getting an answer to my questions. Maybe I'll have more luck on this forum. To sum it up, I'm drop shipping to customers in the U.S; I'm also located in the U.S. My question(s) are: Since it's e-commerce and I don't really have a physical store, can I have a physical presence in my home state per nexus? Secondly: From my Shopify admin, while looking at my liabilities under the 'Taxes and duties' tab, it only displays my home state, despite my having made sales into other states. What could be causing this? I'm trying to get my tax liabilities in the context of drop shipping figured out.  Any help would be greatly appreciated, thanks.

P.S. I've already made sales in my home state as well and want to be sure that I don't already owe taxes. 

[Greta]

Hi, @CC02!

Thanks for your post, I'm happy to share some information with you here. 

I'm unable to provide tax advice, and the only way to be 100% sure on your tax obligations is by contacting a tax specialist in your area. They can review your business model and sales to determine where you'll need to collect taxes. We do, however, have some general information in our resources that can be helpful. 

Our US taxes manual has tons of helpful information, and specifically this section on dropshipping:

If your store uses dropshipping to provide products to your customers, then you are buying a product from another vendor, and then your customers buy that product from you. Whether you charge tax depends on the location of your customer and where you and your dropshipping vendor have nexus. Review the following scenarios and determine which one applies to your business:

• If neither you nor your dropshipping vendor have nexus in your customer's state, then you aren't obligated to charge tax. Your customer will likely pay a use tax to the destination state for the purchase.
• If you don't have nexus in your customer's state, but your dropshipping vendor does, then your vendor might ask you for a resale certificate or charge you the appropriate tax.
• If you have nexus in your customer's state, but your dropshipping vendor doesn't, then you're obligated to charge tax to your customer.
• If both you and your dropshipping vendor have nexus in your customer's state, then your vendor might ask you for a resale certificate or charge you the appropriate tax, and you're obligated to charge tax to your customer.

If you're not sure of your responsibilities in a state, then consult with state tax authorities or a local tax professional.

Our Dropshipping Guide also discusses sales tax obligations, and shares this third-party blog on dropshipping and sales tax. You can check those out for more context. 

I still recommend contacting a tax specialist for more information, as I can't tell you where you need to collect taxes. An easy option is hiring a Shopify Expert that specializes in US sales tax! Shopify experts are highly-skilled designers, developers, and consultants who specialize in building successful brands, businesses, and Shopify stores. Each expert is reviewed before joining the marketplace, so you know you can trust them to get the job done. You can find our tax experts here.

 I hope this helps! Let me know if you have any questions.