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1,064 Views 15 Replies Last post: May 1, 2018 9:08 AM by Lighthouse24 RSS
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Level 0 3 posts since
Mar 19, 2013
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Apr 20, 2018 9:54 AM

Sales Tax & Dropshipping through Createspace

Hi,

 

I want to clarify a few things about sales tax. I plan to accept online orders for my book, then manually go to Createspace, bill myself, but send the book to the customer's shipping address. So I'll use Createspace to dropship my books.

 

My understanding is that Createspace will charge sales tax based on the shipping address and whether they have nexus in that state or not. I don't have to deal with sales tax because it's Createspace's responsibility to do that, right?

 

I just want to double-check about what happens when Createspace ships a book to a state that I have nexus in. I'm in California, so if the customer happens to also be in CA, then my best guess is I still don't have to deal with sales taxes to CA because it's Createspace's responsibility, right? Just in case I have it wrong I thought I'd ask here...

 

Looking forward to your responses! Thank you in advance for your help!

Level 5 5,707 posts since
Jan 17, 2010
Currently Being Moderated
1. Apr 20, 2018 10:12 AM in response to: colorblind
Re: Sales Tax & Dropshipping through Createspace

I believe you do have it wrong. The onus for sales taxes is on the entity who sells to the end customer. In this case, that's you. CreateSpace is just producing the product and providing it to you wholesale; you're the one actually selling it.

 

You'll want to get some kind of wholesale or reseller certificate from your state and supply that to CreateSpace. Then they will not charge you sales tax on any orders you place through your Dashboard, no matter where they ship it. Then you'll need to collect the appropriate sales tax from your end customers and remit that as required by your locality.

 

Lighthouse is more familiar with this, so maybe he'll provide some more information.

 

Sarah
Editor & Book Designer
http://sleepingcatbooks.com
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Level 5 5,707 posts since
Jan 17, 2010
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3. Apr 20, 2018 10:22 AM in response to: colorblind
Re: Sales Tax & Dropshipping through Createspace

You're buying the books at cost; this is wholesale. It doesn't matter if you order 1 copy or 1,000 copies. It's still wholesale. You're still the seller to the end customer, so you're the one responsible for the sales tax.

Level 5 5,707 posts since
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5. Apr 20, 2018 10:39 AM in response to: colorblind
Re: Sales Tax & Dropshipping through Createspace

Correct, but it would be charged to you (by CreateSpace), not the end buyer. This still doesn't get around the fact that YOU are the seller to the final customer, so the legal tax burden is on YOU, not CreateSpace. If you want to be in the business of selling a physical product, then you should do it properly and legally. This requires you to obtain the reseller certificate and supply it to CreateSpace so that they will not erroneously charge YOU sales tax when you are not the final customer.

Level 5 13,123 posts since
Aug 22, 2008
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6. Apr 20, 2018 11:06 AM in response to: colorblind
Re: Sales Tax & Dropshipping through Createspace

I seldom disagree with Sarah, but my understanding of this issue is different.

 

CreateSpace automatically charges the sales tax that is due the state to which a book is being shipped. And since Amazon now operates in every U.S. state that has a sales tax, whatever sales tax is applicable will be charged to you when you place the order to be dropshipped (with the exception noted in the last paragraph).

 

Assuming your business operates only in California, then you would not charge sales tax to your customers in other states. However, you would need to build the additional amount of that tax into your unit cost, and you would account for it as such (and not as "sales tax" charged, collected, or remitted). In other words, from Amazon's perspective it is a sales tax that they have to charge (you), collect (from you), and remit (to the destination state). But from your perspective (as the seller), you do not charge sales tax to your out-of-state customers.

 

Sales within your state are different. You must charge sales tax to those customers yourself, and if your state is like most, you must show the sales tax due as a separate line item on all invoices and receipts. So in this case, you are charging sales tax, collecting it (from customers in your state), accounting for it as such, and would remit it to your state's taxing authority. But here's what makes it tricky: CreateSpace would normally charge you sales tax on that order as well -- so essentially your state would be collecting sales tax twice on a single sale (both you and your customer would be paying it).

 

The workaround for that situation is to treat in-state customer sales as wholesale purchases (even though they aren't). In other words, if you have provided CreateSpace with the proper documentation such that they DON'T charge sales tax on shipments to your state, then there will be no double taxation. You will charge sales tax to your in-state customers, collect it, and remit it to the state -- and CreateSpace/Amazon will not (on those shipments going to your state).

Level 5 5,707 posts since
Jan 17, 2010
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7. Apr 20, 2018 11:16 AM in response to: Lighthouse24
Re: Sales Tax & Dropshipping through Createspace

I didn't read that as really disagreeing with my point, more that I wasn't making my own point clear.

 

But in the OP's shoes, I'd have a problem with paying CS sales tax on orders that they're dropshipping to a state where CS has nexus but I don't. If I operate properly as the reseller (providing CS with the documentation), I wouldn't charge sales tax to my end customer in that state, so I'd just pay CS the production cost and shipping (no tax). If I don't operate properly as a reseller, I don't charge my end customer sales tax in that state, but CS still charges me that sales tax when I place the dropship order. I'm paying more to CS than I need to.

Level 3 344 posts since
Feb 11, 2016
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8. Apr 20, 2018 12:25 PM in response to: colorblind
Re: Sales Tax & Dropshipping through Createspace

You should obtain advice regarding your California sales tax registration, collecting, remitting and other obligations directly from the California Board of Equalization (www.boe.ca.gov) with regards to charging California sales tax.  Alternatively, you should speak with a CPA or other professional that is experienced with sales tax obligations in the USA.

 

Whether you are required to charge sales tax for other states will depend upon many factors including your specific situation which cannot be determined without obtaining answers to a number of questions.  Some of those questions could relate to other non-publishing activities you may do and how you are structured for handling your business operations.

 

CreateSpace is required to charge you for sales tax on your drop shipments unless you have provided them with the appropriate documentation to exempt sales tax for each state where your drop shipments are delivered.  Each state has their own rules.  The fact that CS charges you sales tax does not relieve you of your own obligations for transactions between you and your customer.  It does not matter that you decide to classify some sales as "wholesale" vs. "retail".  What matters is that you properly handle your situation.

Level 5 13,123 posts since
Aug 22, 2008
Currently Being Moderated
9. Apr 20, 2018 3:17 PM in response to: Seisa
Re: Sales Tax & Dropshipping through Createspace

Seisa wrote:

If I operate properly as the reseller (providing CS with the documentation), I wouldn't charge sales tax to my end customer in that state, so I'd just pay CS the production cost and shipping (no tax).

That's true of your own state, but when you dropship to customers outside your state, CreateSpace will still charge the sales tax for that state. Your documentation only ensures that they don't change sales tax for your state (because you are charging it, collecting it, and remitting to your state yourself).

Level 1 166 posts since
Apr 19, 2012
Currently Being Moderated
10. Apr 28, 2018 10:16 AM in response to: colorblind
Re: Sales Tax & Dropshipping through Createspace

I want to know why I'm being charged sales tax on my own book printing and neither Amazon or Createspace have a physical presense in my state at all, I suspect a lot of merchants are pocketing this extra money on sales.

Actually, when you think about the whole system, people are being double taxed on the same money, we already PAID tax on the income- it's called income tax, state, federal, local and SS all paid every week on every paycheck you get at work, then they tax you a second time on the very same money when you do the only thing you can DO with money- spend it!

 

I sent CS an email about it.

Level 4 2,972 posts since
Feb 7, 2015
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11. Apr 28, 2018 10:24 AM in response to: Wolfpause
Re: Sales Tax & Dropshipping through Createspace

CreateSpace cannot help you. The only solution is to move to a state that doesn't charge sales tax on consumer goods.

Level 1 166 posts since
Apr 19, 2012
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12. Apr 28, 2018 10:49 AM in response to: Lorem_Ipsum
Re: Sales Tax & Dropshipping through Createspace

Createspace doesn't HAVE a physical plant in my state, their charging me tax is in error or did you miss this?

 

If Createspace didn't have the cheapest printing prices I'd find another printing house that doesn't charge tax in a state they are not even located in and use them, I'm not paying double taxation on the same money!

Level 4 2,972 posts since
Feb 7, 2015
Currently Being Moderated
13. Apr 28, 2018 1:21 PM in response to: Wolfpause
Re: Sales Tax & Dropshipping through Createspace

Wolfpause wrote:

 

Createspace doesn't HAVE a physical plant in my state, their charging me tax is in error or did you miss this?

No, I ignored it as irrelevant. All that matters is you live in a state with sales tax, so by law CreateSpace must collect it. I suggest you Google "how state sales tax works."

Level 1 166 posts since
Apr 19, 2012
Currently Being Moderated
14. Apr 28, 2018 1:38 PM in response to: Lorem_Ipsum
Re: Sales Tax & Dropshipping through Createspace

No one  ever collects sales tax for another state they don't have a nexus physically in, they collect for their own state not 40 other states, nobody is going to sell a single $2 item on Ebay to one customer and collect 16 cents sales tax and mail it into a state on the other side of the country at a cost of 49 cents for the postage, that's BS, and if they are charging it they are pocketing the money.

I buy stuff on line every day almost and none of them ever have sales tax added unless they are physically in MY state or I were to go pick it up, in which case I cancel the purchase and order the item from someone else, I'm not double paying tax on the same money on mail order purchases- EVER. People need to start standing up and grow some- you are all being DOUBLE TAXED on your already taxed income, the Boston Tea Party and revolution happened for this kind of reason, maybe when people grow some, it needs to happen again.

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