Since our Canadian customer does not have any obligation to obtain a tax exemption form, we need to charge them tax for their drop shipment in a NEXUS state ...

Q. (cont.) ... and then we remit to the appropriate state based on the guidelines. Can the Canadian customer make a claim of “NO NEXUS” to have the end user self-assess?

A. We contacted the Illinois Department of Revenue, as an example. According to the state’s Department of Revenue, if neither your company or your Canadian customer are registered in Illinois and do not have nexus, the customer who receives your drop shipment is required to remit use tax to Illinois.

If your Canadian customer is registered in Illinois, but your company is not, the Canadian company should collect sales tax from the Illinois customer and remit the money to the state.

If your company is registered in Illinois and has established nexus, but the Canadian company is not registered, you should remit the sales tax to the state. You may recover your tax fees when you invoice your Canadian customer. If, however, your Canadian customer presents you with a resale exemption certificate for Illinois, then you do not have to charge it tax or remit to Illinois. (We specifically asked if a Canadian company can obtain a resale certificate from Illinois and were told yes.)

If your company and the Canadian company are registered in Illinois and both organizations have established nexus, the company that invoices the Illinois customer should collect and remit the sales tax to the state.

We recommend that you contact the department of revenue of the state in question to determine your actual liability, and give the particulars of nexus and sourcing.

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