Our business does a lot of drop shipments from our vendors. Do we need to apply for resale certificates in states where our drop-shippers are located?

Response by Diane Yetter    December 5, 2011

Full Question: We are a small size business that does a lot of drop shipments from our vendors. Our vendor has presence in the state of North Carolina, but we don't. We have resale certificate in California. Do we need to apply for resale certificate in North Carolina, or will North Carolina accept a different states' resale certificate?

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Answer:

Diane YetterStates vary in their rules regarding the appropriate exemption documentation that can be provided in order to substantiate a sale for resale in drop shipment situations. Some states will honor a distributors out of state registration while others do not. The state of North Carolina will honor your California registration number. However, you must provide either a North Caroline resale certificate with your California registration number, the Multistate Tax Commission exemption certificate with your California number or the Streamlined Sales Tax Exemption Certificate with your California Number provided on the North Carolina line and indicated as a California number. With one of these pieces of documentation your vendor should not charge you North Carolina tax on shipments into North Carolina. Your customer will have the obligation to pay North Carolina use tax if they make a taxable use of the goods purchased from you.

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