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In the wake of the U.S. Supreme Court’s decision in South Dakota v. Wayfair, overruling the Quill physical presence nexus standard, presently 36 states have adopted and are or will soon be enforcing economic nexus standards. This means that regardless of whether you have physical presence in a state, a significant volume of sales into a state may create sales tax nexus and compliance obligations for your business in that state.
As more B2B and B2C commerce moves to the Internet, companies are becoming increasingly reliant on drop-shippers to fulfill customer orders. Drop shipments typically involve a customer, a retailer and a wholesaler, and the retailer does not maintain inventory, but instead transfers customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer. Drop-shipping wholesalers are also subject to these economic nexus standards, meaning that as their compliance obligations increase, the compliance responsibilities of remote retailers who rely on these drop-shippers will also increase.
When the customer, retailer and drop-shipping wholesaler are located in different states, these transactions create extremely complex sales tax issues, and can create exposure traps for the unwary. For example, is the drop-shipping wholesaler registered for tax purposes in the destination state? Can the drop-shipping wholesaler accept the retailer’s resale certificate? Several destination states do not accept other states' certificates, and these states create the largest risk of sales tax exposure for all parties to the transaction. What is the taxable sales price in that case? What documentation is required-for you and your customer? How do all of these requirements change in light of the economic nexus standards that states are adopting?
Given that all parties to a drop-shipment share sales tax compliance risk, the customer, retailer and drop-shipping wholesaler must proactively manage their obligations and automate certificate management platforms to minimize sales tax risk relating to these transactions.
The webinar will enable corporate tax personal, and their tax advisors to identify, automate and manage multistate sales tax issues relating to drop shipments.
We will review key topics:
- What are the typical attributes of a drop shipment and the most common issues?
- Under the prevailing economic nexus standards, what are the nexus considerations that retailers and drop-shippers must consider in determining their sales tax obligations relating to drop-shipments?
- What are the documentation requirements (both technical and practical) relating to drop-shipments?
- How automation platforms may assist in managing sales tax obligations relating to drop-shipments?
- How to prepare for and manage an audit relating to drop-shipment obligations?
- What states pose the most significant problems for retailers and drop-shippers relating to drop-shipments?
Michael Dillon
Dillon Tax Consulting
Founder & President
[email protected]
4105079282
Mike is an attorney, and the founder and President of Dillon Tax Consulting. With his focus primarily on the state and local tax needs of businesses, Mike provides solutions and planning recommendations to clients' questions regarding sales tax, property tax, business license tax, various other state and local tax matters, and other business compliance requirements. In this capacity, he assists clients to identify their state and local tax obligations and areas of tax exposure, proactively mitigate these exposure items, secure refunds of overpayments, and develop controls to meet tax obligations and minimize tax compliance risks. To date, Mike has saved his clients Tens of $Millions by identifying and securing refund opportunities and minimizing potential exposure. He also represents clients before taxing authorities, successfully resolving tax audits and disputed tax matters. With more than twenty years of state and local tax experience, Mike has both public accounting and private industry expertise. Mike began his career as a tax attorney for a multi-billion dollar international communications company, which he successfully represented in over fifty sales and transaction tax audits before state and local taxing authorities around the country, resulting in savings exceeding $20 Million. Mike also assisted this company to determine the taxability of its products and services, as well as in the conversion of twenty-one legacy billing systems to two new platforms. In his capacity as a state and local tax attorney and consultant, Mike regularly defends taxpayers against state auditors, both during the audit process and on appeal, often coming in when “all hope is lost” after an assessment has been issued. In addition, Mike provides nexus evaluation services, negotiates the voluntary disclosure of taxpayer liabilities with taxing authorities, provides multi-state tax research, and matrix development. Mike also implements automated tax solutions into client accounting and billing platforms, and provides strategic tax planning services for companies ranging in size from small sole proprietors to large Fortune 500 companies. Prior to forming Dillon Tax Consulting, Mike managed the national State and Local Tax practice for an international accounting and management consulting firm whose client base ranged from emerging businesses to large Fortune 500 companies. In this capacity, Mike helped grow the practice by identifying new opportunities, seeking and winning new business, and managing engagement teams. Mike also led the Midatlantic Practice of the National Communications Industry Tax practice for a Big 4 accounting and consulting firm. He also managed the sales and transaction tax practice of the State and Local tax department for two of the country’s largest accounting and consulting firms. Mike has also served as Tax Director and Pension Plan Administrator for a publicly-traded Internet company
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