Idaho Administrative Code › Title IDAPA 35 - Tax Commission, State › Rule 35.01.02 - IDAHO SALES AND USE TAX ADMINISTRATIVE RULES › Section 35.01.02.022 - DROP SHIPMENTS

Current through August 31, 2023
Sections
				63-3615A,
				63-3619,
				63-3620,
				63-3621, & 63-3622, Idaho
				Code
01.
In General
. Drop
			 shipments refer to shipments made by a seller to someone other than its buyer.
			 For example, a Manufacturer produces Product X. The Retailer is a distributor
			 of Product X. The Customer, which does business only in Idaho, is the ultimate
			 buyer and consumer of Product X. The Customer places a purchase order with the
			 Retailer. The Retailer, having no inventory in stock, places a purchase order
			 with the Manufacturer. The Retailer directs the Manufacturer to ship the
			 product directly to the Customer in Idaho. The Manufacturer, however, bills the
			 Retailer for the product and receives payment from the Retailer. The Retailer
			 bills and receives payment from the Customer. The nature and use of Product X
			 is not within any of the specified exemptions contained in the Idaho Sales Tax
			 Act. The Manufacturer may or may not be required to have an Idaho seller's
			 permit. If the Manufacturer sells directly to the Customer without the presence
			 of a retailer, the Manufacturer is acting as a retailer and the transaction is
			 not a drop shipment. (3-31-22)
02.
Parties to the Contract
. The Idaho sales tax is imposed upon sales
			 transactions. Since there is no sales transaction between the Manufacturer and
			 the Customer, the Manufacturer will not be required to collect and remit sales
			 tax from the Customer. (3-31-22)
03.
Sales Tax Responsibilities of the
			 Permitted Manufacturer
. If the Manufacturer is required to have a valid
			 Idaho seller's permit, it has sales tax responsibilities as to the sales
			 transaction between itself and the Retailer. (3-31-22)
a. If the Retailer has an Idaho seller's
			 permit, it will be necessary for the Retailer to provide the Manufacturer with
			 a resale certificate evidencing its intentions to resell Product X. If the
			 Retailer does not provide the resale certificate, then the Manufacturer charges
			 Idaho sales tax on the sale of tangible personal property sold to the Retailer
			 and delivered in Idaho. If the Retailer provides a resale certificate, the
			 Retailer then charges the Customer Idaho sales tax and remits the tax to the
			 Commission together with a proper return. (3-31-22)
b. If the Retailer is not required to have an
			 Idaho seller's permit, a resale certificate from the Retailer to the
			 Manufacturer is unnecessary. If the Retailer has no nexus with the state of
			 Idaho, it can accrue no sales tax liability and the sale between the
			 Manufacturer and the Retailer is not subject to the jurisdiction of the
			 Commission. The Manufacturer must obtain evidence of this fact in the form of a
			 letter from the Retailer stating that they have no nexus in Idaho or by any
			 other clear and convincing evidence. The Customer's use or consumption of
			 Product X within Idaho will cause it to accrue a use tax liability. The
			 Customer will be required to file a use tax return and report and remit the use
			 tax on the purchase of Product X. (3-31-22)