For those of you not familiar with the term, “nexus” refers to a physical presence that a business has in a state. This can be things like an office, warehouse, or store. And if you have nexus in a state, you are required to collect and remit sales tax for any orders shipped to buyers in that state. But what about dropshipping? If you’re new to the ecommerce game, dropshipping is a retail fulfillment method where stores don’t keep products in stock. Instead, when a store receives an order from a customer, it contacts the supplier, who then ships the product directly to the customer. Dropshipping suppliers are usually located in different states than the store’s owner. So, the question is: do you have to claim nexus in your dropshipping supplier’s state? The answer is maybe. It depends on a few different factors that we will explore in this blog post.
What is Nexus?
Nexus is a legal term used to describe a company’s or individual’s physical presence in a state. This means that the company or individual has some sort of physical presence in the state, such as an office, warehouse, store, etc. If you have nexus in a state, you are required to collect and remit sales tax on taxable items sold to customers in that state.
There are a few different ways that nexus can be established in a state. The most common way is through having a physical presence in the state, such as an office, warehouse, store, etc. However, nexus can also be established through having employees or contractors working in the state, having inventory stored in the state, or providing services in the state. If you are unsure whether or not you have nexus in a particular state, you can contact that state’s tax authority for more information.
If you have nexus in a state, you are required to collect and remit sales tax on taxable items sold to customers in that state. This includes both online and offline sales. Failure to comply with this requirement can result in penalties and interest charges from the state.
Do I Need to Claim Nexus in My Supplier’s State?
If you are Dropshipping, you may be wondering if you need to claim nexus in your supplier’s state. The answer is maybe. Here’s what you need to know.
Nexus is a legal term that refers to the connection between a business and a state. This connection can be created through various activities, such as having an office or warehouse in the state, hiring employees in the state, or owning property in the state.
If your business has nexus in a state, you are required to collect and remit sales tax on all taxable transactions made within that state.
There are a few ways that nexus can be created with a dropshipping supplier:
1. If your supplier has nexus in the state where your customer is located, they are required to charge sales tax on the transaction and remit it to the appropriate state agency. In this case, you would not need to claim nexus in your supplier’s state because they are already doing so.
2. If your supplier does not have nexus in the state where your customer is located, but they do have nexus in another state where you have customers, they may be required to charge sales tax on transactions made with customers in that other state. In this case, you would need to claim nexus in both states – the one where your supplier has nexus and the one where your customers are located.
How to Register for a Sales Tax License in My Supplier’s State
To register for a sales tax license in your supplier’s state, you will need to provide some basic information about your business, such as your business name and contact information. You will also need to provide your federal tax identification number. Once you have gathered this information, you can begin the registration process by visiting the website of your state’s taxing authority.
How to Collect and Pay Sales Tax in My Supplier’s State
Assuming your supplier is based in the United States, you will need to collect and pay sales tax in their state if you have nexus there. This usually happens if you have a physical presence in the state, such as an office, warehouse, or store. However, it can also happen if you have employees or contractors working in the state, or if you regularly ship goods into the state.
If you do have nexus in your supplier’s state, you will need to obtain a sales tax permit from that state and start collecting sales tax from your customers. You will then need to file periodic sales tax returns and remit the taxes collected to the state.
If you are not sure whether or not you have nexus in a particular state, we recommend consulting with a tax professional. They can help you determine whether or not you are required to collect and pay sales tax in that state.
Conclusion
Nexus is an important concept to understand when dropshipping, as it can have a big impact on your business. If you have nexus in a state, you may be required to collect and pay taxes on sales made to customers in that state. However, if you don’t have nexus in a state, you won’t be required to collect or pay taxes on sales made to customers in that state. So, do some research and determine whether or not you have nexus in your suppliers’ states before making any decisions about whether or not to claim nexus.
