Drop Shipments (Publication 121)
Drop shippers and resale certificates

Who does the drop shipper charge for sales tax?

However, if the true retailer does not hold a permit:

• The drop shipper is responsible for reporting and paying the tax.
• The drop shipper should charge the true retailer tax based on the retail amount and report and pay it to the California Department of Tax and Fee Administration (CDTFA).
• The true retailer may choose to seek reimbursement from the in-state consumer for the cost of sales tax charged to them by the drop shipper either by increasing the selling price of the product or adding an additional line on the invoice for reimbursement.
• The true retailer cannot issue an invoice with a line called "California tax" or "California sales tax." However they may use a phrase such as "California tax paid to California drop shipper" or similar terminology on their sales invoice, indicating that California tax has been paid to a drop-shipper. This will also alert the in-state consumer that California tax has been paid on their purchase.

Please note: If you are a drop shipper that drop ships tangible personal property to a California customer who is buying the property for resale, tax may not be due. You must obtain a valid California resale certificate from the customer and keep it in your records. The resale certificate provided to the true retailer will be accepted as proof that the sale was for resale.

Sales made to the United States government are not subject to tax. As such, the sale by drop shipment of tangible personal property to the United States government is exempt from tax. In order to relieve the drop shipper from the sales tax liability, the true retailer should forward to the drop shipper, documentation that the ultimate purchaser of the materials is in fact the United States government. Supporting documentation for this transaction includes a copy of the purchase order from the United States government or other documents demonstrating direct payment by the United States government to the true retailer. For additional information on sales to the United States government, please see publication 102, Sales to the United States Government.