Drop Shipping

For information on reflecting shipping charges in your tax calculation, go here.

“Drop Shipping” is more of a business process to define vs. a technical one – one that will require the talents of your company's tax attorney and/or accountant to define what your nexus liabilities and responsibilities are for the origin and destination locations.

Note: Avalara cannot provide recommendations or advice regarding how your company should handle nexus liabilities – this is ultimately the responsibility of your tax attorney or accountant.

What needs to be defined (in advance) is if a “nexus event” is taking place or not. To illustrate a drop shipping scenario, the following example will be used:

1. A customer orders a desk and a chair from your web store totaling $1,500.
2. There is a shipping and handling charge totaling $50 ($25 fee for each - not related to Origin or Destination)
3. The desk ships from your warehouse in Phoenix (where you have nexus liability),
4. The chair however is drop shipped from a partner company with a warehouse in New London, CT. (where you do not have nexus).

How does tax get calculated? Below is what is known so far:

The results of this invoice were as follows: