The Tax Questions Blog

Archive for June, 2010

Question: If I dropship something and the state im dropshipping from charges tax to that state do i have to pay tax x 2?

Ok heres a more detailed description of my growing problem and concern. I have an ebay business here in NJ....I am selling a TV that I would dropship from FRYS ELECTRONICS. Now Frys has a rule where if you live in 10 particular states, you must pay tax. So now lets say someone purchases the item from me and they are in a taxable state according to frys and they pay me 100.00 for tax, do I have to pay frys tax as well as the gov't? Because I'm going to be the one paying the tax to frys to ship to the customer so why would I have to pay 100 for the tax for frys and another 100 for NJ tax? If you're confused, you can email me at DieHard31@aol.com and I will explain further. I really need help on this. 10 POINTS for the best answer. Thanks!

Answer: There is no "frys tax".
The "rule" is not their rule. It is a rule of those 10 states (and most others) that a business must charge tax when shipping to a state where that business operates.

The tax does not have to be paid twice. It may not even have to be paid once.

1. Generally speaking, if you operate only in your home state, and sell something on eBay that is shipped to another state, then you are not required to charge the customer sales tax. For example, you would collect NJ tax only if the customer is also in NJ. (Note that this applies only if the item is shipped, not if the customer comes to you to pick up the item.)

2. If you have the proper paperwork from the State of New Jersey to show that you are a reseller, then you should not have to pay tax on items that you buy from Frys for resale (or for drop shipping to customers). If you provide a copy of the certificate from NJ that you are a reseller to Frys, then Frys should charge you tax only on purchases that are for your own use, not on purchases that are for your customers.

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Answer: yes

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Answer: take the tax free yield and divide it by 1 minus your tax bracket.

example: 5% tax free yield (coupon)
your tax bracket is 35%
to figure out the tax equivalent yield
5 / .65 (1 - .35 ) = 7.69%

The tax equivalent yield for this bond is 7.69% in the 35% tax bracket.

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