Do I Have To Collect Sales Tax as a U.S Citizen Dropshipping From U.S Suppliers?

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3 min readJul 20, 2017

Please note, I have done my best to summarize information from blogs such as tax jar. We always recommend consulting a certified accountant with any questions you have regarding sales tax.

Short Answer: Most Definitely If You Don’t Want These Guys Coming After You…

As a U.S citizen or resident, you are considered to have a tax nexus in the state you are operating in. This means that if a customer is located in your state and buys from your state then you must charge that customer sales tax.

What is a Sales Tax Nexus? (Taken From TaxJar)

Sales tax nexus occurs when your business has some kind of connection to a state. All states have a slightly different definition of nexus, but most of the time states consider a “physical presence” creates nexus.
Physical presence can mean a number of things, including:
Having an office
Having an employee
Having a warehouse
Having an affiliate
Storing inventory
Drop shipping from a 3rd party provider
Temporarily doing physical business in a state for a limited amount of time, such as at a trade show or craft fair
If you suspect you might have a physical presence in a state, you could check with that state’s taxing authority to determine whether or not you have sales tax nexus.

With Dropshipping, Sales Tax Can Get Quite… Technical

Depending on where your suppliers are located, you could have multiple tax nexuses meaning that you would be responsible for collecting sales tax from customers that purchase items from your store that are located in every state you have a tax nexus in!

Which States Count “3rd Party Dropshipping Suppliers” as having a Sales Tax Nexus?

As you see here, some states count having a 3rd party dropshipping supplier as a physical presence in the state meaning you need to pay sales tax to that state.

If your dropshipping supplier is located in the U.S in one of these states, then you must register with the state to collect and pay sales tax.

California
New York
Texas
Florida

If your supplier is located outside of these states and you do not have any other attributes that would link you to a sales tax nexus in the state, then you do not need to collect sales tax. If however a customer purchases from the same state as your supplier (IE: Your supplier is in Alabama and a customer from Alabama purchases from your shop) the supplier would charge you sales tax for the order as they have a tax nexus in the state!