In the United States, all sellers (whether retailers or drop shippers) are required to collect sales tax if they have sales tax nexus in the state to which the item ships.

What is Dropshipping?

Dropshipping is a supply chain management method in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer.

Do Dropshippers Have To Pay Taxes?

Yes, dropshippers are required to pay taxes on their sales. The amount of taxes that must be paid depends on several factors, such as the state in which the seller has nexus and the type of product being sold.

What is Sales Tax Nexus?

Sales tax nexus is a term used to describe a connection between a business and a particular state that requires the business to collect sales tax on purchases made in that state. This connection can be created by having a physical presence in the state, such as an office, warehouse, or employee. It can also be created by selling goods or services in the state, or by having an affiliate relationship with a business in the state.

What Types of Taxes Do Dropshippers Have to Pay?

Dropshippers are required to pay taxes on their sales, which generally include state sales tax, local sales tax, and sometimes special taxes, such as lodging taxes or tourism taxes. In addition, some states may require dropshippers to pay a use tax.

How Can Dropshippers Pay Taxes?

Dropshippers can pay taxes either directly to the state or to a third-party tax collection agency. Most states allow dropshippers to register for a sales tax permit online and file their taxes electronically.

Conclusion

Dropshippers are required to pay taxes on their sales if they have sales tax nexus in the state to which the item ships. The amount of taxes that must be paid depends on several factors, such as the state in which the seller has nexus and the type of product being sold. Dropshippers can pay taxes either directly to the state or to a third-party tax collection agency.