Sales tax explained for new e-commerce businesses using drop shipping

Accounting & Taxes

Topic summary

Sales tax obligations for small e‑commerce sellers using drop shipping (e.g., Printful). Key concepts: “nexus” (connection to a state that creates tax duties) and “resale/exemption certificate” (so the supplier doesn’t charge you sales tax on your cost; you then collect/remit from the customer where required).

Main points and updates:

  • OP’s approach (CA): register for a sales tax permit and give Printful a resale certificate so they don’t charge sales tax; collect/remit tax from customers where you have nexus. Wayfair (2018) allows states to require remote sellers to collect tax; many use thresholds (often $100k sales or 200 transactions).
  • Update: some states have removed the 200‑transaction test; 27 states still use it. Thresholds and rules vary by state, and legislation is state‑specific; check current state requirements and Printful’s policies.
  • CA caveat: providing a CA resale certificate generally requires a CA sales tax registration and filing returns; legal entities may later receive an $800 franchise tax notice.

Open items/unanswered:

  • How to manage global VAT/GST rates.
  • How to answer CA seller’s permit application question for out‑of‑US drop shipping.
  • Whether SC‑only sales via Printful still require SC registration.

Consensus: consult a tax professional; more drop shipping tax resources were promised.

Summarized with AI on December 15. AI used: gpt-5.
3

Hey @majornorth ,

I hope your business is going well. I realize this your post was from a year ago, but I thought this updated chart on economic nexus thresholds would help you and other sellers. Some states have removed the 200 transactions, but there are still 27 states that once you pass 200 transactions, you have created nexus https://salestaxsystem.s3.amazonaws.com/Sales_Tax_Compliance+_Economic_Nexus_Shopify.pdf.

In regards to the dropshipping, that is where exemption certificates will come into play from your supplier. We are working on a new PowerPoint and video soon that will simplify this complicated part of the dropshipping equation.

I hope this helps.

Kind regards,

Scott Letourneau

Shopify Tax Partner

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