When fulfilling orders for customers in California, specific tax rules apply due to the state’s dropshipping regulations.
How is sales tax calculated for dropshipped items?
According to California Regulation 1706, if you’re an out-of-state retailer without a California seller’s permit and you sell to a customer in California, the drop shipper (like Printful) is responsible for collecting sales tax.
The tax is calculated based on:
- The retail price charged to the California consumer, if known.
- If the retail price is unknown, then the drop shipper must calculate tax based on their selling price to the out-of-state retailer, plus a 10% markup.
For example, if Printful sells a product to you for $10, and we don’t know your retail price, we’ll calculate sales tax on $11 ($10 + 10%).
Why does this matter?
This ensures compliance with California’s tax laws, which aim to capture tax revenue from out-of-state sales delivered within the state.
How can I avoid the 10% markup?
To prevent the automatic 10% markup calculation, you can:
- Provide the actual retail price charged to the California consumer.
- Ensure you have a valid California seller’s permit and submit a resale certificate.
Still need help? Our Support Team is here for you—reach out anytime through our contact form or start a chat with us.