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Sellers Outside the State of California: Do You Need to Register with the BOE?

BOE information for out of state sellers

Honey’s Place requires its purchasers to register for a California sales tax permit if they will have Honey’s Place ship goods directly to any of their customers located in California. California Law CA Board of Equalization requires taxes to be collected on all orders shipped from the Honey’s Place warehouse, since it is located in California, to a consumer located in California. When Honey’s Place delivers goods directly to your customer (the consumer) the transaction is called a drop shipment.

What is Drop Shipping?

A drop shipment is a sale of tangible personal property (TPP), in which the seller accepts an order from a customer, places the order with a third party vendor (such as Honey’s Place or another wholesaler), and the seller directs his vendor (e.g. Honey’s Place) to deliver the item directly to the customer rather than himself.

Typically, drop shipment transactions involve two businesses, two sales, and one consumer: 

  • The true retailer is an out-of-state business. The true retailer sells the product to the California consumer.
  • The drop shipper, (e.g. Honey’s Place) sells the product to the true retailer, but ships the product directly to the California consumer on behalf of the true retailer.
  • The consumer in California buys and receives the product.

Which states consider drop shipping a nexus-creating activity?

In NY, FL and CA, the use of an in-state drop shipper by an out-of-state retailer is sometimes considered a nexus-creating relationship. In California, if a drop shipper delivers goods on a remote seller’s behalf, sales tax must be collected.

What is Nexus?

Nexus is when a non-resident seller creates a substantial, frequent and continuous, physical presence in the state. This includes, employees, drop shippers and affiliates.

Do I need to collect California sales and use tax when my business is located outside the state to use Honey’s Place drop shipping services:

If your business is outside the state of California and you have set up a drop ship account with Honey’s Place, we require you to have a CA resale certificate.

This is for all orders shipped from the Honey’s Place warehouse including:

  • Orders from your own website
  • Orders from Amazon, eBay, Rakuten, Sears or any other online retailer
  • Any order that we are shipping products on your behalf through U.S. Mail, FedEx, UPS or another common carrier.

Under California Law, Honey’s Place must either charge sales tax on the California drop shipments or obtain a resale certificate from customers (the seller/retailer). Honey’s Place does not charge tax to the retailer or consumer. A seller must register with California in order to issue a California resale certificate. It is important to understand that if you call the California Board of Equalization (BOE) regarding your sales tax registration requirement they will advise on your registration requirement is based on whether you have created nexus in California. As an out of state Internet seller how you conduct your business determines whether you have nexus in California.

Note:  For customers who is out of the state of California, after completing your California Resale Certificate,  you must call  (916) 227-6600 to complete your application process.

Please keep in mind that when Honey’s Place delivers goods to a California location for you, the sale is subject to California sales tax even if the BOE advises you that you do not have nexus. The tax requirement the state of California places on Honey’s Place is why Honey’s Place requires all of its purchasers who will have the company drop ship goods for them to register in California or pay sales tax on the orders.

For more information on the out of state application process, click here.  

If you have any questions about Dropshipping or Nexus,  contact your Honey’s Place Account Manager or email sales@honeysplace.com 

 

About honeysplaceblog (87 Articles)
Honey's Place is an award-winning pleasure products distributor with over 20 years of experience helping our customers succeed. With a state-of-the-art drop shipping, Honey’s Place has one of the highest fill rates in the industry. Honey's Place has created a vibrant company culture that brings together a top-notch team that encourages collaboration and building strong relationships.

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