Sales Tax Questions » Drop Shipments

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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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Response: States 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.

Diane L. Yetter
YETTER-tax meets technology
Sales Tax Institute
(312) 701-1800

Sales Tax Questions answered by Diane Yetter.


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