Why item ship-from location is irrelevant

by TaxJar November 1, 2023

A common seller’s question goes something like this:

“I have sales tax nexus in Texas through FBA, but I sold an item on eBay to a customer in Texas and shipped it from my house here in Montana. Since the item didn’t ship from Texas, do I have to charge sales tax to the Texas customer?”

And the buyer’s question usually goes something like this:

“I bought an item from a company that has a store here in my home state of Connecticut, and had it shipped to my address here in Connecticut. But the item actually shipped from South Carolina. Why did the seller charge me sales tax?”

The answer to both questions is the same:

If a seller has sales tax nexus in a state, where the item actually shipped from is irrelevant. 

What sales tax nexus means for business owners

If a business owner has sales tax nexus in a state, that business owner needs to charge sales tax to every buyer in that state. That’s true even if the item you sell never passes through that state.

Here are some examples:

Example 1: You have nexus in Tennessee because you sell on Amazon FBA and some of your products are in a warehouse there. You happen to hear from your customer later (hopefully it isn’t for a bad reason!) and they mention that their item shipped from an Amazon Fulfillment Center in California. Even though the item wasn’t shipped from Tennessee, you’re still on the hook to charge sales tax to your buyer in Tennessee.

Example 2: You’re an eBay seller only. You live in Maine, but hire your nephew in Vermont to help you with listings, sourcing and customer service in your eBay business. Since Vermont considers an employee to create sales tax nexus, you now need to register for a sales tax permit and charge sales tax to buyers in Vermont. That’s even if you ship the item from your home state, Maine.

Please note: This blog is for informational purposes only. Be advised that sales tax rules and laws are subject to change at any time. For specific sales tax advice regarding your business, contact a tax advisor.

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