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How to I figure when to charge sales tax and how much?

Posted on 2008-02-11
Medium Priority
Last Modified: 2013-11-19
I operate an eCommerce shopping cart site.  I am located in Kansas.  The products I sell are drop shipped directly to the customer.  The warehouse that does the dropshipping is located in Maine.  They also have a warehouse in California.  I know that if I sell something to someone in Kansas, I have to charge them sales tax.  The dropshipper is saying that they must charge ME sales tax for any drop shipments to Maine OR California.

Can any one point me to some good resources to help me figure out what information is actually correct?  

My confusion is this... If I sell to someone in Kansas, how do I make sure I charge the correct amount of tax?... Different cities have different tax rates.

If they (the dropshipper) charges me sales tax for shipments to Maine and California, do I collect that tax from the customer and if so, do I pay the states the tax or is it the responsibility of the dropshipper?  I'm guessing that all I am doing is re-reimbursing myself for what I am charged and I do not actually have to file these taxes.

I know this is a confusing subject but Im just looking for resources and advice from EXPERIENCED ecommerce retailers.

Question by:rbudj
LVL 29

Accepted Solution

coreybryant earned 2000 total points
ID: 20905584
Usually people will charge the maximum sales tax for that state.  Some electronic payment gateways have current tax tables that you can take advantage of to charge the correct sales tax.

For the most part, you would charge if the highest percent in Kansas is 7.3%, you would charge that.  You can download the table here: http://www.ksrevenue.org/5digitzip.htm 

The dropshipper is charging sales tax because they have locations in both places.   Since they are charging taxes for those two states, the tax should go to them and they should pay the taxes.  You would charge taxes to residents of Kansas.  If you charge a sales tax on customers in California, California will probably be expecting the tax from you, not the dropshipper.  But it also depends on your association with the dropshipper.  

Usually you have a reseller's permit so that you are not charged sales tax since you would be charging sales tax.  If not, the government would be getting money twice on the sale.  One from the manufacturer and one from the seller.

For web sites, check out http://www.taxadmin.org/ and http://www.ksrevenue.org

I know you don't want to hear this but it needs to be said.  You should have a CPA / bookkeeper helping you with this that is very familiar with Kansas tax law and e-commerce.   Or even your attorney should be able to help you with this as well.  
LVL 16

Author Closing Comment

ID: 31430047
Thank you

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