Many online entrepreneurs use dropshipping services to sell physical goods like t-shirts without having to hold any inventory themselves. But just because you’re not physically handling the product doesn’t mean you’re exempt from collecting sales tax. In this post, we’ll explore the issue of sales tax on dropshipped t-shirts and explain how you can ensure you’re complying with the law in your state. We’ll also provide some tips on how to automate sales tax collection with a dropshipping service.
What is a sales tax?
Sales taxes are imposed by states, counties, and municipalities on the retail sale of goods and services. In the United States, sales tax is governed by a patchwork of state and local laws, which can make it complicated for businesses to understand and comply with.
When you sell products through a dropshipping service, you are typically required to collect sales tax from your customers. The exact amount of tax you need to collect depends on the laws in your state. You can find out more about sales tax rates and how to collect and remit taxes on the website of your state’s taxation department.
Do I need to collect sales tax when dropshipping t-shirts?
There are a couple of different scenarios that could apply when selling t-shirts with a dropshipping service, so it really depends on your specific circumstances.
If you are selling t-shirts that are shipped directly from the supplier to the customer, then you would not be responsible for collecting sales tax. The supplier would be responsible for collecting and remitting any applicable taxes on the sale.
However, if you are selling t-shirts that are shipped from your own location (i.e. you are storing inventory and fulfilling orders yourself), then you would be responsible for collecting sales tax. You would need to determine the applicable tax rate based on the shipping address of the customer, and collect the tax along with the purchase price of the shirt.
How do I collect sales tax when dropshipping t-shirts?
When you dropship t-shirts, you are considered the retailer and are responsible for collecting sales tax from your customers. The good news is that most dropshipping services will calculate and collect the sales tax for you. To do this, they will need your customer’s shipping address so that they can determine the correct sales tax rate.
If you are using a dropshipping service that does not collect sales tax on your behalf, you will need to set up a system to calculate and collect the sales tax yourself. This can be done using software like TaxJar or Avalara. You will also need to file quarterly sales tax returns with your state’s Department of Revenue.
Conclusion
The short answer is: it depends. If you are selling t-shirts through a dropshipping service, you may or may not be required to collect sales tax depending on the laws of your state. It’s important to check with your state’s taxation authority to find out what the requirements are for your business. In general, though, if you are dropshipping t-shirts (or any other product) from another state, you will not be required to collect sales tax as long as the supplier charges and collects the tax on behalf of their own state. So, while it may seem complicated at first, in most cases you won’t need to worry about collecting sales tax on t-shirts sold through a dropshipping service.
