Sales and Use Taxes: Drop Shipment Transactions (Portfolio 1340)

Description

Tax Management Portfolio, Sales and Use Taxes: Drop Shipment Transactions, No. 1340, analyzes the general issues that arise from drop shipment transactions, transactions which generally involve three parties, a customer, retailer and a third party supplier who is directed to deliver the goods directly to the customer. It is the triangular structure of these transactions that raises numerous sales and use tax issues.

The Portfolio addresses these issues according to three broad categories. The first category encompasses the legal issues that arise under the specific state statutes and regulations. Included are discussions of the tax treatment of the three parties to a drop shipment.

Second are constitutional issues that arise from imposing collection responsibilities on out-of-state sellers. Considered in particular are Due Process and Commerce Clause nexus issues as they relate to drop shipment transactions.

The third category, administrative and policy issues, includes discussions of registration requirements, and obtaining and maintaining exemption documents. In addition, the Multistate Tax Commission’s and Streamlined Sales and Use Tax Agreement’s standards regarding the taxability of drop shipment transactions are considered.

Updates to the Portfolio will be incorporated directly into the Detailed Analysis.

This Portfolio may be cited as Wethekam and Houghton, 1340 T.M., Sales and Use Taxes: Drop Shipment Transactions. Within the Multistate Tax Portfolio Series, however, references to the Portfolios will include only the Portfolio numbers and titles.

Table of Contents

1340.01. OVERVIEW
1340.02. GENERAL ANALYSIS OF DROP SHIPMENT TRANSACTIONS Collapse Next Level
1340.03. CONSTITUTIONAL ISSUES Collapse Next Level
1340.04. LEGAL AND AUDIT CONSIDERATIONS Collapse Next Level