Monday, March 02, 2009

Golden Rule: The Ship-From State is Irrelevant

As a corollary to the delivery point golden rule, the state that TPP is shipped from has no standing. They are irrelevant.


1. They can't impose sales tax on an interstate transaction because of the Commerce Clause.
2. The only tax that will be imposed will be a tax on the buyer's use of the TPP. And that use will only occur where the buyer actually uses it, in other words: controls it. And that will not be happening if the seller actually ships it to the buyer.
3. Just about every state has a law that essentially says that there is no tax imposed if the property is shipped out of the state pursuant to the terms of the agreement. Which kind of states 1 and 2 sideways.

In a nutshell, the ship-from state is irrelevant. The delivery state gets to make the rules and impose the use tax.

But the ship-from state is going to want proof you DID ship it out of state; as opposed to the buyer coming into the state and picking the product up at your dock. So you'll need shipping documents and bills of lading that show you did, in fact, ship the goods.

Sales Tax Guy

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