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Originally Posted by TRA  It's happening all over. The IRS is cracking down on tax laws that have been in place for years, but haven't really been enforced.
Here are a couple of examples:
If a gear dealer in New York has an item dropshipped from XYZ microphones to their customer in Maryland the dealer in New York must have tax exemption in the state of Maryland to not be taxed.
If the dealer was in Ohio and the customer is in Colorado the dealer only needs tax emeption in one of those states to be tax exempt.
It's the responsibility of the manufacturer that dropshipped the items to collect that tax. It's different for each state/scenario. I actually have a spreadsheet that maps out the different scenarios so I know who is responsible when. |
That is not the IRS, it happens on a state by state basis as the Federal Govt. doesn't give a shit about state revenue [except that it can be deducted from Federal tax payments at the end of the year]. Each state varies on this. California [no surprise to anyone] the worst with the "drop ship tax collections" that have to be collected by MFG's for drop ships... so it is often less expensive for all involved if you have the product shipped to an out of state dealer and then back to California [I think this is the UPS loophole].
Also, if you stay current and correct with all of your state tax payments except the use tax, the reality of the situation is that if you lose your receipts or restructure you books to reflect "tax payments" being made to the retailer you can probably get away with it without penalty. Remember the state has the 'burden of proof' and the only way they'll know what is going on is if the schedule an audit [which is usually scheduled a couple of weeks in advance so you can "cook your books" as necessary.
Happy dodging!!