Should I have been charged tax?

January 3, 2014 10:02 AM

I run a promotional merchanding company. We are fully registered as an LLC in the state of NJ. We have a tax ID number and are officially a re-seller. We recently did an order for a client located in the state of California. The vendor who manufactured the items for us is also located in the state of California. When our final invoice came, we were charged tax and were told when the vendor and final destination were inthe same state (or at least in CA), then we are due to be charged tax on the merchandise......We have done plenty of orders with the same scenario (produced in CA and shipped to CA) without being charged tax....... We are confused. Should we have to pay tax or not on this order?
posted by TwilightKid to Work & Money (3 answers total)

I am not your tax professional.

If the goods are for resale (you are billing the end user for the goods), you may be able to provide the vendor with a Sales Tax Form (quick googling shows ST-3 for NJ):

http://www.state.nj.us/treasury/taxation/pdf/other_forms/sales/st3.pdf

Which says that you are responsible for billing the end user the applicable sales tax on a given sale.
posted by effigy at 10:13 AM on January 3, 2014

I am not a tax expert by any stretch, but I have been a purchasing agent. My understanding has always been that, as long as they have the proper certification, resellers do not pay taxes on the materials they buy to resell. The reseller is responsible for charging the end user the proper taxes.
posted by Benny Andajetz at 10:22 AM on January 3, 2014

If your vendor shipped the goods directly to the final consumer, that's known as a drop shipment. CA explains their rules on drop shipments here.

Because you are not registered in CA, and won't be collecting CA tax, the duty falls to the CA vendor to collect tax on the transaction.

(not your tax professional)
posted by politikitty at 10:25 AM on January 3, 2014 [2 favorites]