TTR Announces Release of First Ever Sales Tax Decision Maker for Drop Shipments

Friday, December 4th, 2015

Package delivery man.

TTR's research team has just completed the first-ever sales tax decision maker for drop shipment transactions. The development of TTR's new Drop Shipment Decision Maker involved research of over 3 million unique answers related to drop shipment transactions.

What Are Drop Shipments?

A Drop Shipment is a sale or purchase (a "transaction") that involves three (3) parties:

(1) The Seller,

(2) The Manufacturer who ships the thing sold, and

(3) The Buyer.

Why Do Drop Shipments Create Sales Tax Issues?

Drop shipments, by their very nature, create added complexity. Normally a Buyer purchases a product or service from a Seller. Drop shipments introduce an additional party to the transaction: the Manufacturer/Shipper. The addition of this party creates questions like the following:

  1. Does the Manufacturer have to collect tax from the Seller?
  2. Does the Manufacturer have to collect tax from the Buyer?
  3. Does the answer change depending on Manufacturer's shipping method or where the Manufacturer's inventory is located?
  4. If the Manufacturer is required to collect tax, what is the "tax base" (the amount used to calculate sales tax due)?
    1. Is the tax base equal to the amount paid by the Buyer to the Seller?
    2. Is the tax base equal to the amount paid by the Seller to the Manufacturer?
  5. If the Manufacturer is not required to collect tax, what exemption documentation will the state accept?
  6. Does the activity of the Manufacturer create nexus (a sales tax collection obligation) for an out-of-state Seller?

These are just a few of the issues that TTR's research team had to confront, understand, and research to create TTR's new Drop Shipment Decision Maker.

TTR's Drop Shipment Decision Maker prompts subscribers to answer a series of questions and then presents clear answers with full legal support. Subscribers first select the state of the Seller, the state of the Manufacturer, and the state of the Buyer, and then select the tax questions to be answered. The result: 3.3 million tax answers for over 130,000 different scenarios.

Courtney Cherry, formerly an industry Tax Director and currently TTR's Vice President of Transaction Tax Research, had this to say about the new release: "Drop shipments can be confusing; in fact, many of the questions we get from our subscribers ask how to accurately tax drop shipment transactions. If a seller in State A sells an item to a consumer in State B, and that item is delivered by the manufacturer from inventory in State C, who is responsible for collecting tax? And what is the tax base? These are the types of questions that led us to create this first-of-its-kind Drop Shipment Decision Maker. This will really help our subscribers who struggle with these issues every day."

About TTR

Transaction (buying or selling things), Tax (the tax on this activity), Resources (our people, our website, our support services) - TTR, Inc.

TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

TTR likes to keep things simple and fun, which is why it has great people who provide help to clients on any support questions they have about transaction tax issues.

Please visit TTR on the web at or call 866.578.8193.

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