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WHOLESALER / MANUFACTURER
ca on m er om om r c st r o cu le to sa s le hip ho s W rop d or de r cu s to Pl ac es m er
RETAILER
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The problem with the drop shipping scenario is that it carries very high risk of sales tax errors. The complexity and changeability of the rules regarding sales tax and drop shipping is mind-boggling. And increasingly, sales tax errors lead to more aggressive audits and expensive nes and penalties. Things may/will become even more complicated if a federal proposal to allow states to require out-of-state sellers to collect sales tax becomes law. Under the Marketplace Fairness Act, states that dont currently require out of state manufacturers, distributors, wholesalers, or drop shippers to collect sales tax would likely begin to. By expanding denition of nexus to capture more revenue from sales tax, states are poised to hone in on industries--such as drop shipping--that have typically avoided the sales tax compliance nightmares faced by others. The following questions will help drop shippers, wholesalers, manufacturers and retailers determine when and where sales tax is owed, and whether or not a reseller certicate should be submitted.
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4) How can drop shippers, retailers, wholesalers, and manufacturers get drop shipping related sales tax right?
Given the complexity of sales tax rules regarding drop shipping, many manufacturers, wholesalers, retailers, and drop shippers need sales tax assistance. And its no wonder. There are over 11,000 taxing jurisdictions in the U.S. Then there are the sales tax rates and rules themselves, which address everything from how and when to le and remit sales tax to whether or not a product is taxable. These are particularly complex for direct sellers dealing with a wide range of products over a large geographical area. It is virtually impossible to accurately determine sales tax rates manually using rate tables and zip code look-upsespecially given sales tax holidays, exemptions, and rate and rule changes. Once a company identies the states in which it has nexus, it can implement a system for automatically updating and tracking applicable sales tax rates and rules. Without an efcient process in place, companies drain valuable resources by tasking employees with the herculean task of managing this process. An automated system enables employees to spend their valuable time on more revenue-generating activities.
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About Avalara
A privately held company, Avalara was founded by a team of tax and software industry veterans to fulll a vision of delivering an affordable, scalable sales tax solution. Thus making what was not economically feasible in the past for mid-sized business not only affordable, but more accurate as well all with the latest and most innovative technology available. From Bainbridge Island, close to Seattle, Avalaras knowledgeable staff works tirelessly to help customers put the hassles of sales tax compliance out of mind. Avalaras mission is to transform the tax process for customers by creating cost-effective state-of-the-art solutions. The company does so through integrated on-demand, Web-based software services that provide transparent transactions, accurate tax compliance, painless administration and effortless reporting.
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