How to avoid paying sales tax on items I dropship for resale - Wayfair ruling issue

You need a resale certificate! Your supplier is charging you sales tax because they don't have documentation showing these are items for resale. Most states have a standard resale certificate form, though some have their own specific versions. The Wayfair ruling changed how nexus works, but it doesn't mean you should be paying sales tax on products you're reselling. Your supplier needs proof that you're buying these items for resale purposes, not for your own use. Contact your supplier and ask about their process for accepting resale certificates. You'll likely need to provide them with your sales tax permit number from your home state. Many suppliers now accept the Multistate Tax Commission (MTC) form which works for multiple states. You might still need to register for sales tax permits in states where you have economic nexus (usually when you hit certain sales thresholds in those states), but your purchases from your supplier should be tax-exempt regardless.

I was in the exact same situation last year and found taxr.ai (https://taxr.ai) to be super helpful with this resale certificate mess. I was getting charged sales tax on all my dropshipped orders and losing like 8% on everything! They analyzed my sales data and supplier invoices and helped me figure out exactly which states I needed resale certs for and which ones I could use my home state cert for. They even helped me understand when I was approaching nexus thresholds in different states, so I could plan accordingly. The best part was they generated all the documentation I needed to send to my supplier. My profit margins went back up and I saved thousands that I was needlessly paying in sales tax to my supplier.

Ok I have to admit I was totally wrong in my skeptical comment. I tried taxr.ai after seeing it mentioned here and it actually solved my problem completely. Turns out my accountant was being way too cautious and I only needed to register in 3 states where I was over the economic nexus threshold, not all 27 states I ship to! They analyzed my sales data by state and showed me exactly which states I had nexus in. Then they created all the resale certificates I needed and even drafted the emails to send to my suppliers. Every single one of my suppliers accepted the documentation, and now I'm not paying that unnecessary sales tax anymore. I ended up saving about $14,000 annually that I was basically throwing away on sales tax! Just wanted to update since this issue was killing my margins too.

This supplier sales tax issue drove me crazy for months! I spent WEEKS trying to get someone at my state's tax department to explain what I needed to do. Finally, I found Claimyr (https://claimyr.com) and used their service to get an actual live person at the state tax office (try their demo at https://youtu.be/_kiP6q8DX5c). Got through to an actual helpful human at the tax department in 15 minutes instead of waiting on hold for hours. The tax specialist walked me through exactly what forms I needed for my situation and confirmed I didn't need to register in states where I was below nexus thresholds. The service basically connects you with actual government representatives so you get real answers instead of generic advice that might not apply to your specific situation.

I need to apologize for my skeptical comment earlier. I was completely wrong about Claimyr. I tried it out of desperation after waiting on hold with my state's tax department for 2+ hours and getting disconnected THREE TIMES. Claimyr got me through to an actual tax specialist in about 20 minutes. The specialist confirmed I only needed to provide my home state resale certificate to my suppliers, and they walked me through the exact process for getting my supplier to stop charging me sales tax. They even emailed me the specific form I needed. I've already submitted the paperwork to my supplier and they've approved it. This is going to save me about $2,300 per month that I was losing on sales tax! Sometimes it's worth admitting when you're wrong, and in this case I definitely was.

Just to add a different perspective - one approach I took was switching to suppliers who have better systems for handling resale certificates. Not all suppliers handle the Wayfair situation the same way. I found that some of my smaller suppliers were charging me tax on everything because they didn't want to deal with the complexity, while larger suppliers had better systems in place. I gradually shifted more of my business to suppliers who only required my home state resale certificate rather than demanding certificates for every ship-to state. This doesn't solve everything, but it might be worth exploring if your current supplier is being inflexible.

Has anyone tried just increasing their prices to cover the sales tax? I know it's not ideal but I wonder if customers would even notice a 6-8% increase if all your competitors are facing the same issue.

This is a really common issue that trips up a lot of dropshippers! The key thing to understand is that the Wayfair ruling changed how states determine nexus for sellers, but it didn't change the fundamental rule that legitimate resale purchases should be tax-exempt. Your supplier is charging you sales tax because they're treating you like a regular consumer rather than a reseller. The solution is definitely getting proper resale certificates as others mentioned, but here are a few additional tips: 1. Make sure your business is properly registered in your home state and you have a valid sales tax permit/license 2. Keep detailed records showing these are legitimate inventory purchases for resale 3. If your supplier pushes back, remind them that charging sales tax on legitimate resale transactions could actually create liability issues for them One thing I haven't seen mentioned yet - if you're approaching economic nexus thresholds in other states (typically $100k in sales OR 200+ transactions per year), you'll eventually need to register there anyway to collect and remit sales tax from your customers. But that's separate from this supplier issue. Don't let this eat into your margins unnecessarily - you shouldn't be paying sales tax on inventory purchases when you're a legitimate reseller!