To: AFCO, Dewitts and Longacre salespeople and dropship customers
From: Ted Hemmelgarn, CFO, AFCO Performance Group, LLC
RE: Drop Shipment exemption certificate rules
Most of you are aware that Wayfair vs. South Dakota has changed the sales tax landscape significantly for those states that have adopted laws based on the case. While this court case was federal, each state creates its own sales tax laws which are oftentimes quite complicated and can vary quite a bit from state to state.
AFCO Performance Group is following the new laws passed enabling states to tax out of state sellers shipping into their state, but not having a physical presence in their state. As of today we are registered in, collecting, and remitting to 33 different states with others to soon follow.
One of the areas of complication for us has been drop shipments that we make for our customers to states that our customer is not registered in but we are.
Click here for clarification of drop shipment exemption certificate rules from the Sales Tax Institute that should help our customers to have more sales tax exempt, law-abiding transactions.
Please note that on the page 1 diagram titled The Drop Shipment Model, APG, LLC is the Shipper, our customer is the Seller, and our customer’s customer is who we are shipping to and is titled the Customer.
Also attached below are the following example certificates completed as we understand them. In the examples we have assumed the seller is located in and registered only in Indiana, but each seller will need to complete the forms using their actual home state name and home state identification number as needed:
MTC Exemption for CO, ID, IL, ME, MO, NM, and TX. Our third party tax provider, Avalara tells us that while AZ, FL and SC are on the SSTP list provided by the Sales Tax Institute, they are not states that accept an SST form and should be on the MTC form.
Attached below are blank certificates:
Based on item number 5 of the Sales Tax Institute’s Certificate Rules, if the Drop Ship Seller is not registered with them, they can write a letter documenting their non-dealer status to us stating they have no nexus in the state of Louisiana.
Based on item number 6 of the Sales Tax Institute’s Certificate Rules, it appears that CA, CT, MA, MS, and TN drop ships will be taxed unless certain specific things happen within a transaction.
Based on item 7, drop shipments to HI, MD, and DC are required to be taxed unless the Seller is registered in that state and provides a resale certificate. Keep in mind, however, that we are not currently registered in nor have plans to register in DC.
We sincerely appreciate your business. We want to make the ever changing landscape of sales tax nexus as simple and easy to navigate as possible. If you have questions, please contact Deb Demunbrun (ext 6222), Ryan Monar (ext 6258), or me (ext 6213) and we will try to get answers for you.