By Rachel Tatum

Journalists sat down with exhibitors during last week’s Exhibitor Summit in Las Vegas, sharing proven tips and personal insight on how exhibitors can obtain additional media coverage before, during and after the SEMA Show.

Journalists sat down with exhibitors during last week’s Exhibitor Summit in Las Vegas, sharing proven tips and personal insight on how exhibitors can obtain additional media coverage before, during and after the SEMA Show. While the media panel offered dozens of valuable suggestions, there were common themes that resonated from all six journalists who were on the panel. Among the suggestions:

Provide Information Electronically: One of the panelists said that “paper doesn’t really help us a great deal,” while another panelist simply said, “reporters are lazy.” Either way, a common suggestion from the journalists was to provide press materials electronically, whether on a USB drive or on your company website. The idea is to make it easy for journalists to easily copy and paste the text.

Post Releases Online: Journalist confirmed that they refer to the Online Media Center for content before, during and even after the SEMA Show. The Online Media Center is a portal where all SEMA Show exhibitors are able to upload press releases. Exhibitors can attach photos and select the market segments that are relevant to their news.

Focus on the Benefits: Highlight the key benefits of your product in the beginning of your press release. Reporters receive countless press releases announcing new products, so having a new product isn’t news to them. What will interest them is what makes your product different. “Tell me what problem your product is solving.”

Include High-Res Images and Videos: While many media outlets post news stories online, many also have printed publications and need high-res images. Some reporters also suggested including links to short videos. “If all you have is a still, it’s not as exciting. Video tells a story.” Panelists unanimously agreed that the video does not need to be professionally produced and most cell phones are capable of generating acceptable videos for their needs.

Consider Offering Embargos: Journalists understand that exhibitors oftentimes break announcements on the first day of the SEMA Show, but if the information is not ready and prepared to release, then it’s more likely that stories won’t run at all. Giving a reporter advance information and photos under embargo can be a great strategy to get the reporter to cover your story.

Bonus Tip for First-Time Exhibitors: Many journalists have been attending the SEMA Show for multiple years and have established relationships with exhibitors. However, all reporters are always looking for new content and suggested that first-time exhibitors highlight in their press materials that they are exhibiting at the SEMA Show for the first time. “Tell me you’re brand new to the SEMA Show and tell me a little something about your company.”

To receive additional tips or for assistance with media outreach during the SEMA Show, contact Rachel Tatum at rachelt@sema.org or 909-978-6669.

By Rachel Tatum

Journalists sat down with exhibitors during last week’s Exhibitor Summit in Las Vegas, sharing proven tips and personal insight on how exhibitors can obtain additional media coverage before, during and after the SEMA Show.

Journalists sat down with exhibitors during last week’s Exhibitor Summit in Las Vegas, sharing proven tips and personal insight on how exhibitors can obtain additional media coverage before, during and after the SEMA Show. While the media panel offered dozens of valuable suggestions, there were common themes that resonated from all six journalists who were on the panel. Among the suggestions:

Provide Information Electronically: One of the panelists said that “paper doesn’t really help us a great deal,” while another panelist simply said, “reporters are lazy.” Either way, a common suggestion from the journalists was to provide press materials electronically, whether on a USB drive or on your company website. The idea is to make it easy for journalists to easily copy and paste the text.

Post Releases Online: Journalist confirmed that they refer to the Online Media Center for content before, during and even after the SEMA Show. The Online Media Center is a portal where all SEMA Show exhibitors are able to upload press releases. Exhibitors can attach photos and select the market segments that are relevant to their news.

Focus on the Benefits: Highlight the key benefits of your product in the beginning of your press release. Reporters receive countless press releases announcing new products, so having a new product isn’t news to them. What will interest them is what makes your product different. “Tell me what problem your product is solving.”

Include High-Res Images and Videos: While many media outlets post news stories online, many also have printed publications and need high-res images. Some reporters also suggested including links to short videos. “If all you have is a still, it’s not as exciting. Video tells a story.” Panelists unanimously agreed that the video does not need to be professionally produced and most cell phones are capable of generating acceptable videos for their needs.

Consider Offering Embargos: Journalists understand that exhibitors oftentimes break announcements on the first day of the SEMA Show, but if the information is not ready and prepared to release, then it’s more likely that stories won’t run at all. Giving a reporter advance information and photos under embargo can be a great strategy to get the reporter to cover your story.

Bonus Tip for First-Time Exhibitors: Many journalists have been attending the SEMA Show for multiple years and have established relationships with exhibitors. However, all reporters are always looking for new content and suggested that first-time exhibitors highlight in their press materials that they are exhibiting at the SEMA Show for the first time. “Tell me you’re brand new to the SEMA Show and tell me a little something about your company.”

To receive additional tips or for assistance with media outreach during the SEMA Show, contact Rachel Tatum at rachelt@sema.org or 909-978-6669.

By SEMA Washington, D.C., Staff

The U.S. House Natural Resources Committee passed SEMA-supported legislation that would dedicate much-needed funding to address the more than $16 billion maintenance backlog on America’s public lands. The “Restore Our Parks and Public Lands Act” would create a national park service and public lands fund for Fiscal Years 2020 through 2024, using unallocated revenue from energy produced on federal government-owned lands and waters. The amount of money that could be allocated to the fund would be capped at $1.3 billion annually during the five-year program.   

The bill is also strongly supported by the Outdoor Recreation Roundtable (ORR), which is comprised of 27 top industry associations, including SEMA, representing off-roading, camping, fishing, boating, hiking, archery and other sports. This legislation recognizes the significant economic contributions that the outdoor recreation industry generates ($887 billion per year in economic activity and provides an estimated 7.6 million direct jobs) and is consistent with ORR’s efforts to support rebuilding and expanding the nation’s recreation-related infrastructure. The “Restore Our Parks and Public Lands Act” now goes to the House floor for consideration.  

The deferred maintenance backlog has received considerable attention recently, as Vice President Pence and U.S. Department of Interior Secretary David Bernhardt recently traveled to Yellowstone National Park to discuss the matter. The Senate Energy and Natural Resources Committee held a hearing last week on a bill to address the maintenance backlog on National Park Service lands. Jessica Wall, executive director of ORR, testified in support of the bill.  

“Visitation to our public lands and waters has continued to increase. However, insufficient appropriations have contributed to a growing deferred maintenance backlog, negatively impacting visitor experiences and affecting the local communities that rely on them,” said Wall. “When domestic and international visitors recreate on our public lands, they should be awed by the natural beauty of the great outdoors, not disappointed with the recreation infrastructure that supports runners, hikers, bikers, climbers, anglers, paddlers, campers, boaters, RV'ers, snowmobilers, off-road vehicle users and more.”

For more information, contact Eric Snyder at erics@sema.org.

By SEMA Washington, D.C., Staff

The U.S. House Natural Resources Committee passed SEMA-supported legislation that would dedicate much-needed funding to address the more than $16 billion maintenance backlog on America’s public lands. The “Restore Our Parks and Public Lands Act” would create a national park service and public lands fund for Fiscal Years 2020 through 2024, using unallocated revenue from energy produced on federal government-owned lands and waters. The amount of money that could be allocated to the fund would be capped at $1.3 billion annually during the five-year program.   

The bill is also strongly supported by the Outdoor Recreation Roundtable (ORR), which is comprised of 27 top industry associations, including SEMA, representing off-roading, camping, fishing, boating, hiking, archery and other sports. This legislation recognizes the significant economic contributions that the outdoor recreation industry generates ($887 billion per year in economic activity and provides an estimated 7.6 million direct jobs) and is consistent with ORR’s efforts to support rebuilding and expanding the nation’s recreation-related infrastructure. The “Restore Our Parks and Public Lands Act” now goes to the House floor for consideration.  

The deferred maintenance backlog has received considerable attention recently, as Vice President Pence and U.S. Department of Interior Secretary David Bernhardt recently traveled to Yellowstone National Park to discuss the matter. The Senate Energy and Natural Resources Committee held a hearing last week on a bill to address the maintenance backlog on National Park Service lands. Jessica Wall, executive director of ORR, testified in support of the bill.  

“Visitation to our public lands and waters has continued to increase. However, insufficient appropriations have contributed to a growing deferred maintenance backlog, negatively impacting visitor experiences and affecting the local communities that rely on them,” said Wall. “When domestic and international visitors recreate on our public lands, they should be awed by the natural beauty of the great outdoors, not disappointed with the recreation infrastructure that supports runners, hikers, bikers, climbers, anglers, paddlers, campers, boaters, RV'ers, snowmobilers, off-road vehicle users and more.”

For more information, contact Eric Snyder at erics@sema.org.

By SEMA Washington, D.C., Staff

The U.S. House Natural Resources Committee passed SEMA-supported legislation that would dedicate much-needed funding to address the more than $16 billion maintenance backlog on America’s public lands. The “Restore Our Parks and Public Lands Act” would create a national park service and public lands fund for Fiscal Years 2020 through 2024, using unallocated revenue from energy produced on federal government-owned lands and waters. The amount of money that could be allocated to the fund would be capped at $1.3 billion annually during the five-year program.   

The bill is also strongly supported by the Outdoor Recreation Roundtable (ORR), which is comprised of 27 top industry associations, including SEMA, representing off-roading, camping, fishing, boating, hiking, archery and other sports. This legislation recognizes the significant economic contributions that the outdoor recreation industry generates ($887 billion per year in economic activity and provides an estimated 7.6 million direct jobs) and is consistent with ORR’s efforts to support rebuilding and expanding the nation’s recreation-related infrastructure. The “Restore Our Parks and Public Lands Act” now goes to the House floor for consideration.  

The deferred maintenance backlog has received considerable attention recently, as Vice President Pence and U.S. Department of Interior Secretary David Bernhardt recently traveled to Yellowstone National Park to discuss the matter. The Senate Energy and Natural Resources Committee held a hearing last week on a bill to address the maintenance backlog on National Park Service lands. Jessica Wall, executive director of ORR, testified in support of the bill.  

“Visitation to our public lands and waters has continued to increase. However, insufficient appropriations have contributed to a growing deferred maintenance backlog, negatively impacting visitor experiences and affecting the local communities that rely on them,” said Wall. “When domestic and international visitors recreate on our public lands, they should be awed by the natural beauty of the great outdoors, not disappointed with the recreation infrastructure that supports runners, hikers, bikers, climbers, anglers, paddlers, campers, boaters, RV'ers, snowmobilers, off-road vehicle users and more.”

For more information, contact Eric Snyder at erics@sema.org.

By SEMA Washington, D.C., Staff

The U.S. Trade Representative (USTR) will accept exclusion requests for “List 3” products imported from China, beginning June 30 and ending September 30, 2019. Any exclusions granted will be retroactive to September 24, 2018, when the duties were first put in place. The exclusion will last for a period of one year after it has been granted.

The List 3 group of Chinese imports covers nearly $200 billion worth of products, including many auto parts, from engines and metal fasteners to tires, transmission belts, brake pads and suspension springs. The deadline for submitting exclusion requests for about $50 billion worth of Chinese products covered under Lists 1 and 2 has already closed. The USTR is still reviewing Lists 1 and 2 requests, which include some miscellaneous metal, rubber and plastic parts for auto equipment.

View more information on submitting a List 3 exclusion requests.

Companies seeking requests will be asked to demonstrate that the product is available only from China, that the tariff will cause severe economic harm and that the good is strategically important. If a request is granted, it will apply to all imported products within the tariff subheading, not just the company making the request. 

For more information, contact Stuart Gosswein at stuartg@sema.org.  

By SEMA Washington, D.C., Staff

The U.S. Trade Representative (USTR) will accept exclusion requests for “List 3” products imported from China, beginning June 30 and ending September 30, 2019. Any exclusions granted will be retroactive to September 24, 2018, when the duties were first put in place. The exclusion will last for a period of one year after it has been granted.

The List 3 group of Chinese imports covers nearly $200 billion worth of products, including many auto parts, from engines and metal fasteners to tires, transmission belts, brake pads and suspension springs. The deadline for submitting exclusion requests for about $50 billion worth of Chinese products covered under Lists 1 and 2 has already closed. The USTR is still reviewing Lists 1 and 2 requests, which include some miscellaneous metal, rubber and plastic parts for auto equipment.

View more information on submitting a List 3 exclusion requests.

Companies seeking requests will be asked to demonstrate that the product is available only from China, that the tariff will cause severe economic harm and that the good is strategically important. If a request is granted, it will apply to all imported products within the tariff subheading, not just the company making the request. 

For more information, contact Stuart Gosswein at stuartg@sema.org.  

By SEMA Washington, D.C., Staff

The U.S. Trade Representative (USTR) will accept exclusion requests for “List 3” products imported from China, beginning June 30 and ending September 30, 2019. Any exclusions granted will be retroactive to September 24, 2018, when the duties were first put in place. The exclusion will last for a period of one year after it has been granted.

The List 3 group of Chinese imports covers nearly $200 billion worth of products, including many auto parts, from engines and metal fasteners to tires, transmission belts, brake pads and suspension springs. The deadline for submitting exclusion requests for about $50 billion worth of Chinese products covered under Lists 1 and 2 has already closed. The USTR is still reviewing Lists 1 and 2 requests, which include some miscellaneous metal, rubber and plastic parts for auto equipment.

View more information on submitting a List 3 exclusion requests.

Companies seeking requests will be asked to demonstrate that the product is available only from China, that the tariff will cause severe economic harm and that the good is strategically important. If a request is granted, it will apply to all imported products within the tariff subheading, not just the company making the request. 

For more information, contact Stuart Gosswein at stuartg@sema.org.  

By SEMA Washington, D.C., Staff

On June 21, 2018, the Supreme Court issued its "South Dakota vs. Wayfair" decision allowing states to require sales-tax collection based on a company’s volume of sales. One year later, most states are pursuing this option. What follows is an overview of the issue along with a description of drop shipments.  

Companies without any physical presence in a state can now be required to collect sales tax based on their sales volume. In June 2018, the U.S. Supreme Court ruled in favor of a South Dakota state law requiring remote sellers to collect sales tax (the term “remote” applies to internet, catalog and telephone sales along with other types of transaction). The Court overturned the 1992 Quill decision, which required a physical presence to create “substantial nexus,” thereby allowing state sales-tax collections.  

A company can now have “economic nexus” in a state without otherwise having a physical presence. While granting South Dakota the right to require tax collections based on the volume of sales into the state, the Court did not specifically rule on what amount of sales triggers an economic presence. Rather, it sent the South Dakota v. Wayfair case back to a lower court to address the issue of whether the state law placed an undue burden on interstate commerce. The parties (Wayfair, Overstock and Newegg) then settled out-of-court in October 2018.  

While the question of “undue burden” is technically unsettled, the Supreme Court ruling provided guidance when it deemed the South Dakota law as setting a sensible small-business safe harbor. The South Dakota law established a small-business exemption for retailers with less than $100,000 or 200 transactions in annual sales.  

The Court noted that the law provided small-business sellers with a reasonable exemption and prohibited retroactive collection. The Court also observed that South Dakota is part of the Streamlined Sales and Use Tax Agreement (SSUTA). The SSUTA is intended to address tax collection burdens by creating single, state-level tax administration, simplified tax rates and tax returns, uniform definitions, a central electronic registration system for all member states and the availability of free tax administration software (there are currently 23 participating SSUTA states in addition to Washington, D.C. For more information, visit www.streamlinedsalestax.org).

Economic nexus for remote sellers is based on sales revenue, the number of transactions or both. Companies should assume that economic nexus is here to stay following last year’s Supreme Court decision and plan accordingly. The Court decision has made it less likely that the U.S. Congress will address the issue through federal legislation.

States have been eager to collect sales-tax revenues for years and have been quick to enact laws and update regulations following the Court ruling. Since the Court indicated that the thresholds set under the South Dakota law seemed reasonable ($100,000 or 200 transactions), many states have adopted the same thresholds or are setting higher levels.

How should companies respond to the new developments governing state sales tax?

First, does your company exceed the threshold for remote sales-tax nexus? For most states, the threshold is relatively high: $100,000 or 200 transactions in annual sales. For many small- and medium-size companies, there may be no exposure.

If your company does meet a state’s economic nexus threshold, should a company immediately register, collect and remit the taxes? Not necessarily.

For all companies, this is a time to step back and review all potential liabilities. For example, is there a chance that your company already had physical nexus and should have been collecting sales taxes due to the presence of a sales representative, a distribution or storage facility or participation in a trade show? Some states also have economic franchise and other tax obligations. It is important to review the status of a company’s presence in a state before registering to collect sales tax.

Returning to the economic nexus threshold issue for remote sales, states may vary in how they are calculated. Revenues may be based on gross sales, retail sales or taxable sales. The number of transactions may encompass one agreement, multiple invoices or monthly subscriptions. Each state will define when a taxable year has commenced when calculating whether the company is below or above the economic threshold. If a company is close to the exemption threshold for a specific state, it should then review how the state calculates nexus.

All states have a formal or informal voluntary disclosure agreement (VDA) process for addressing tax liabilities. If a company determines that a tax exposure already exists but has not been paid, the company should take advantage of the VDA process since it limits the lookback period of tax liabilities (usually to three years), removes most if not all penalties and sometimes reduces or eliminates interest. Caution: The VDA process is not always available once you have registered to collect sales tax, so there is an incentive for conducting a comprehensive tax-risk assessment before registering.

SEMA recommends that companies consult their accountant or tax professional regarding the issues raised.  

To follow are the current out-of-state sales tax collection requirements, as of May 1, 2019, but please note that these requirements are still changing.

Drop Shipments

A drop shipment is a way for the retailer to deliver a product to the customer via the manufacturer (or wholesaler or another retailer). There are many benefits, such as allowing the retailer to display the goods in a brick-and-mortar store, in a catalog or online without keeping the goods in stock.  

There are essentially two transactions occurring in a drop shipment. The first is most likely a “sale for resale,” from the manufacturer to the retailer. In this instance, the manufacturer will expect to be issued a resale certificate by the retailer who is then responsible for collecting any applicable sales tax from the customer. The second transaction is when the retailer bills the customer (the product end-user). The second sale is taxable as dictated by the laws of the state where the customer resides.

With the two sales transactions comes two questions: do either of the sellers (retailer and manufacturer) have nexus in the destination state and is the sale from the manufacturer to the retailer a “sale for resale?”

The question of nexus depends on several different scenarios. If the manufacturer has nexus in the state where the customer resides, then some type of resale certificate should be provided by the retailer to prevent the manufacturer from charging sales tax on the wholesale cost of the goods sold to the retailer. In turn, if the retailer has nexus in the state where the drop shipment occurs, the retailer will need to charge the customer sales tax on the retail cost of the property (and any delivery charges that are taxable). Below are the most common scenarios encountered with drop shipments but they could vary depending on the parties involved.

If neither the manufacturer or retailer has nexus in the destination state, there is no legal obligation to obtain an exemption certificate or to charge sales tax, assuming sales are below the state’s “economic nexus” threshold for remote sellers, but it’s a good practice to collect certificates even if not required.

If the manufacturer has nexus but the retailer does not, the manufacturer will request a resale certificate from the retailer that is valid for the destination state. While many states will accept a retailer’s “home” state certificate or registration number, some destination states require a certificate from that state. When a state-specific certificate is required but the retailer cannot provide one, the manufacturer is required to charge sales tax to the retailer even though the sale is for resale. Some companies choose to voluntarily register in a jurisdiction so they can provide a resale certificate, but that means that they will have to start collecting and remitting tax on all taxable sales into the jurisdiction.

If the retailer has nexus but not the manufacturer, then the retailer is obligated to collect the appropriate tax.  

If both parties have nexus, the manufacturer will expect a resale certificate from the retailer, and the retailer will collect the appropriate tax.

Given the various scenarios and state laws, SEMA recommends that companies consult their accountant or tax professional for more information.  

For more information, contact Stuart Gosswein at stuartg@sema.org.

By SEMA Washington, D.C., Staff

On June 21, 2018, the Supreme Court issued its "South Dakota vs. Wayfair" decision allowing states to require sales-tax collection based on a company’s volume of sales. One year later, most states are pursuing this option. What follows is an overview of the issue along with a description of drop shipments.  

Companies without any physical presence in a state can now be required to collect sales tax based on their sales volume. In June 2018, the U.S. Supreme Court ruled in favor of a South Dakota state law requiring remote sellers to collect sales tax (the term “remote” applies to internet, catalog and telephone sales along with other types of transaction). The Court overturned the 1992 Quill decision, which required a physical presence to create “substantial nexus,” thereby allowing state sales-tax collections.  

A company can now have “economic nexus” in a state without otherwise having a physical presence. While granting South Dakota the right to require tax collections based on the volume of sales into the state, the Court did not specifically rule on what amount of sales triggers an economic presence. Rather, it sent the South Dakota v. Wayfair case back to a lower court to address the issue of whether the state law placed an undue burden on interstate commerce. The parties (Wayfair, Overstock and Newegg) then settled out-of-court in October 2018.  

While the question of “undue burden” is technically unsettled, the Supreme Court ruling provided guidance when it deemed the South Dakota law as setting a sensible small-business safe harbor. The South Dakota law established a small-business exemption for retailers with less than $100,000 or 200 transactions in annual sales.  

The Court noted that the law provided small-business sellers with a reasonable exemption and prohibited retroactive collection. The Court also observed that South Dakota is part of the Streamlined Sales and Use Tax Agreement (SSUTA). The SSUTA is intended to address tax collection burdens by creating single, state-level tax administration, simplified tax rates and tax returns, uniform definitions, a central electronic registration system for all member states and the availability of free tax administration software (there are currently 23 participating SSUTA states in addition to Washington, D.C. For more information, visit www.streamlinedsalestax.org).

Economic nexus for remote sellers is based on sales revenue, the number of transactions or both. Companies should assume that economic nexus is here to stay following last year’s Supreme Court decision and plan accordingly. The Court decision has made it less likely that the U.S. Congress will address the issue through federal legislation.

States have been eager to collect sales-tax revenues for years and have been quick to enact laws and update regulations following the Court ruling. Since the Court indicated that the thresholds set under the South Dakota law seemed reasonable ($100,000 or 200 transactions), many states have adopted the same thresholds or are setting higher levels.

How should companies respond to the new developments governing state sales tax?

First, does your company exceed the threshold for remote sales-tax nexus? For most states, the threshold is relatively high: $100,000 or 200 transactions in annual sales. For many small- and medium-size companies, there may be no exposure.

If your company does meet a state’s economic nexus threshold, should a company immediately register, collect and remit the taxes? Not necessarily.

For all companies, this is a time to step back and review all potential liabilities. For example, is there a chance that your company already had physical nexus and should have been collecting sales taxes due to the presence of a sales representative, a distribution or storage facility or participation in a trade show? Some states also have economic franchise and other tax obligations. It is important to review the status of a company’s presence in a state before registering to collect sales tax.

Returning to the economic nexus threshold issue for remote sales, states may vary in how they are calculated. Revenues may be based on gross sales, retail sales or taxable sales. The number of transactions may encompass one agreement, multiple invoices or monthly subscriptions. Each state will define when a taxable year has commenced when calculating whether the company is below or above the economic threshold. If a company is close to the exemption threshold for a specific state, it should then review how the state calculates nexus.

All states have a formal or informal voluntary disclosure agreement (VDA) process for addressing tax liabilities. If a company determines that a tax exposure already exists but has not been paid, the company should take advantage of the VDA process since it limits the lookback period of tax liabilities (usually to three years), removes most if not all penalties and sometimes reduces or eliminates interest. Caution: The VDA process is not always available once you have registered to collect sales tax, so there is an incentive for conducting a comprehensive tax-risk assessment before registering.

SEMA recommends that companies consult their accountant or tax professional regarding the issues raised.  

To follow are the current out-of-state sales tax collection requirements, as of May 1, 2019, but please note that these requirements are still changing.

Drop Shipments

A drop shipment is a way for the retailer to deliver a product to the customer via the manufacturer (or wholesaler or another retailer). There are many benefits, such as allowing the retailer to display the goods in a brick-and-mortar store, in a catalog or online without keeping the goods in stock.  

There are essentially two transactions occurring in a drop shipment. The first is most likely a “sale for resale,” from the manufacturer to the retailer. In this instance, the manufacturer will expect to be issued a resale certificate by the retailer who is then responsible for collecting any applicable sales tax from the customer. The second transaction is when the retailer bills the customer (the product end-user). The second sale is taxable as dictated by the laws of the state where the customer resides.

With the two sales transactions comes two questions: do either of the sellers (retailer and manufacturer) have nexus in the destination state and is the sale from the manufacturer to the retailer a “sale for resale?”

The question of nexus depends on several different scenarios. If the manufacturer has nexus in the state where the customer resides, then some type of resale certificate should be provided by the retailer to prevent the manufacturer from charging sales tax on the wholesale cost of the goods sold to the retailer. In turn, if the retailer has nexus in the state where the drop shipment occurs, the retailer will need to charge the customer sales tax on the retail cost of the property (and any delivery charges that are taxable). Below are the most common scenarios encountered with drop shipments but they could vary depending on the parties involved.

If neither the manufacturer or retailer has nexus in the destination state, there is no legal obligation to obtain an exemption certificate or to charge sales tax, assuming sales are below the state’s “economic nexus” threshold for remote sellers, but it’s a good practice to collect certificates even if not required.

If the manufacturer has nexus but the retailer does not, the manufacturer will request a resale certificate from the retailer that is valid for the destination state. While many states will accept a retailer’s “home” state certificate or registration number, some destination states require a certificate from that state. When a state-specific certificate is required but the retailer cannot provide one, the manufacturer is required to charge sales tax to the retailer even though the sale is for resale. Some companies choose to voluntarily register in a jurisdiction so they can provide a resale certificate, but that means that they will have to start collecting and remitting tax on all taxable sales into the jurisdiction.

If the retailer has nexus but not the manufacturer, then the retailer is obligated to collect the appropriate tax.  

If both parties have nexus, the manufacturer will expect a resale certificate from the retailer, and the retailer will collect the appropriate tax.

Given the various scenarios and state laws, SEMA recommends that companies consult their accountant or tax professional for more information.  

For more information, contact Stuart Gosswein at stuartg@sema.org.