Guide to Dropshipping and Sales Tax in 2024: For Retailers and Online Businesses


Welcome to the whimsical world of dropshipping and the confounding carnival of sales tax!

First off, let’s give a round of applause for dropshipping! This nifty trick means sellers don’t need to stockpile goods like a squirrel preparing for winter, and manufacturers don’t have to play shopkeeper. Win-win, right?


But wait! There’s a twist in the plot: sales tax compliance. If you think understanding Monopoly is tough, try figuring out who owes what in this three-ring circus of transactions.

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Dropshipping 101: The Course You Didn't Know You Needed

According to the Grand Oracle, also known as Wikipedia, dropshipping is like a magic act where the retailer makes things appear at your doorstep without actually touching them. Ta-da!

Double Trouble: Two Sales, One Transaction

Ready for some drama? In the magical realm of dropshipping, TWO sales are happening:

✅ The Dazzling Customer: Orders something fab and thinks the seller is the star of the show.

✅ The Savvy Seller: Takes the money and runs… to order the item from a supplier, that is.

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Three's Company: A Tale of Three Perspectives

👉 The Curious Customer: Shops online as usual. It’s like buying something off Amazon, but cooler because it’s not Amazon.

👉 The Middleman, AKA the Seller: Takes your order and your money, then gives your shipping details to the supplier like passing a secret note in class.

👉 The Silent Supplier: Takes orders from the seller and ships the stuff directly to you, without ever knowing if you’re a dog person or a cat person.

Tax Me If You Can: The Sales Tax Saga

Hold onto your calculators, because now we’re diving into the tax labyrinth! The rules depend on where everyone lives, what’s being sold, and whether you’ve got something called a “nexus” (sounds like a sci-fi term, but it’s tax lingo).

Here’s the gist:

💡 Customers pay tax to the seller.

💡 Sellers give the tax to Uncle Sam and a “Get Out of Jail Free Card” to the supplier, also known as a resale exemption certificate.

💡 Suppliers keep this golden ticket for when the tax auditor comes to town.

Sometimes plot twists happen, and the supplier or even you, the customer, might have to be the tax hero of the day.

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Sales Tax Exemption Certificates: The Dumbledore of Dropshipping

Feeling like you’re walking a tightrope? Don’t fret! You can either hire a Sherpa (a tax pro) to guide you through the mountain of rules or invest in a GPS (automated sales tax solutions) to keep you on track. Just remember, the world of sales tax is ever-changing, like a kaleidoscope, so keep your eyes peeled!

And that, my friends, is your rollercoaster ride through the amusement park of dropshipping and sales tax in 2024! Buckle up; it’s always a wild ride!

We are here to help you!

Avoid the scary ups and downs of dropshipping tax compliance for your business and know what your situation will look like. Need help with your dropshipping tax or securing a sales tax permit? Give one of our experts a call today and keep the profits of your business soaring high!

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Insogna CPA