The Missouri Department of Revenue issued a letter ruling clarifying which party in a drop shipping transaction is ultimately liable for collecting tax from Missouri customers. The letter ruling specifically concerns a seller who sends their printable designs to a wholesaler, and has the wholesaler directly ship finished printed goods to the end customer. In this scenario, the state determined that the tax liability fell on the seller, not the wholesaler, as the title to the printed goods transferred from the wholesaler to the seller, and then to the end customer at the time of delivery. Though the seller never has physical possession of the property, the nature of the transaction made the final transfer to the Missouri customer the seller’s responsibility.
The letter ruling indicates that the seller in this specific example is subject to registering and collecting sales tax in Missouri. When interpreting letter rulings, it’s important to understand that the ruling only applies to the very specific situation as outlined in the letter, but this situation does point out the important of the transfer of title and its impact upon tax liability.
(Missouri LR 8232, Taxability of Third-Party Drop Shipment, March 30, 2023)