U.S. sales tax has become a nationwide legal obligation after the June 2018 Supreme Court Decision “South Dakota vs. Wayfair”. The Supreme Court says even though you have no physical present in a state if you do enough in business sales to that state ($100K is the threshold with a few states making a threshold of 200 orders shipping into their state) then you are responsible to register, collect tax, and remit sales tax to that state.

We are currently only going to be obligated to register in Florida, and hopefully soon Texas and Wisconsin. This means that we will only be charging Florida sales to customers where their orders ship to is Florida. Any other state we ship to we will not be charging sales tax until we meet the $100K threshold. Our customers can present us with a current and valid Florida Annual Resale Certificate which we will honor and exempt/remove tax from their Florida orders, unless we sell them consumable items like gloves that are not resold but used in their business. Once the systems are in place, we will turn on the tax obligation for Florida and I will write rules that will exempt products but will tax consumable items.

Inventory stocked in Florida, at least for a while will be able to ship orders to any state without having a legal obligation to tax our customers and remit sales tax to a state until we meet their $100K threshold. Currently the only state we would need to collect an exemption certificate and file returns for is Florida.

This is where we ask our vendor to ship goods directly to our customer. States use destination-based taxing calculated on the delivery location rather than the seller’s location. Our vendor delivers products into a state and if they have economic nexus, they are required to either charge us sales tax or accept our resale certificate for that state. If we cannot provide a valid resale certificate for the ship-to-state then the supplier/vendor is required to treat the sale as taxable, even if the retailer/us intends to resell the product. The states regard these third party drop shipments as two separate legal transactions.

If we use a third-party vendor and that vendor is obligated in certain states or all states to collect and remit sales tax, they will tax our orders with exception of Florida. Most states do not accept an out-of-state resale certificate and there are only a handful of states who agree they will accept the customer’s home state certificate for resale only, but that is up to the vendor to agree and be comfortable in giving us a concession.