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Avalara Help Center

Should we charge tax on an item that is shipped to a freight forwarder?

Overview

You are shipping an item to a client that is outside of the states where you have nexus (where you collect tax), but the item is being delivered to a freight forwarder that is in a state where you collect tax, to be sent on the the final destination for the client. Avalara AvaTax is calculating tax on the freight forwarder address, you want to know if you should override that to charge at the customer location so there is no tax applied.

Environment

Avalara AvaTax

Resolution

  • Whether tax is based on the customer end point or the freight forwarder address is based on several factors and is a legal question
  • We suggest you consult with a CPA or Tax Attorney to confirm how your business should collect tax in this case, factors include (but are not limited to):
    • When does the ownership of the property change to the customer?
    • What type of product (item) is being sold?
    • How is the item shipping?