I'm planning to do a site which will list products from other
companies who will drop ship orders that we forward to them. We will
not take possession of any inventory and will essentially act as an
online sales agent for the drop shippers. We will receive the money
from customers and pay the drop shippers the net amount after
deducting our commission.
The drop-shippers/suppliers are located in many different states and
tracking each order to collect taxes only in cases where the customer
lives in the same state as the supplier would be an administrative
nightmare. Has anyone else dealt with this issue?
I've spoken to a few people, including a CPA who said that legally,
all a website needs to do is put some sort of statement on the site
telling customers that it is their responsibility to pay sales taxes
on a purchase if they live in the same state as the vendor who shipped
it to them. If this is true, perhaps there is no actual legal
requirement that websites collect sales taxes. I just want to be sure
we're covered so the tax auditors won't come knocking one day.
If we were a simple e-tailer which stocked inventory and did the
shipping ourselves, it would be straightforward. Just collect sales
taxes from anyone based in our state. But since we do neither, and are
just a sales agent, I'm not sure if that's all we would be liable for.
The suppliers do not charge us sales tax, since we are not buying
anything from them. All we get is a "sales commission" (we make it
clear on our site that we are just a sales agent, not a retailer who
purchases products wholesale, then resells it).
I guess an analogy would be ebay. They list auction products and
merely get a commission for any items sold (however in their case,
they do not get involved in processing payments and instead, customers
deal with each other directly). I wonder if ebay is liable for any
I'm thinking it might be simpler to just consider our site a retailer
(as if we actually purchased the products wholesale) instead of a
"sales agent/service provider", get a resale certificate in our state
and then just collect and pay sales taxes on purchases from customers
in our state. The only potential issue would then be if this treatment
is inappropriate since we do not stock or ship the merchandise.
Thanks in advance for any advice.