Is Shipping Taxable?

Overview

Sales tax on shipping charges can be complex and varies by state. It's crucial to understand these nuances to ensure accurate billing and compliance. This article breaks down when and where shipping charges are taxable based on various state rules and regulations.

General Rule

In many states, shipping charges are subject to sales tax if they are part of the sale of taxable goods. However, whether shipping charges are taxable can depend on how the charges are presented and whether they are separately stated.

Handling Shipping Charges

1. Determine Taxability:

   • Assess whether the items being shipped are taxable. If they are, shipping charges are generally taxable as well.

   • Check if the shipping charges are separately stated. In many cases, separately stated charges are not subject to sales tax.

2. Invoice Correctly:

   • Ensure shipping charges are correctly itemized on invoices.

   • Apply sales tax accordingly, based on state-specific rules.

3. Stay Updated:

   • Sales tax regulations can change. Regularly review state guidelines and consult with tax professionals if necessary.

The below lists of states where shipping charges are and are not taxable apply to an e-commerce transaction where:

• The item or items shipped are subject to sales tax;

• The seller ships the item to the buyer using a common carrier like USPS, UPS, FedEx, etc.

• The seller pays for the postage/shipping and then charges the buyer for that exact amount.

• The seller separately states the shipping charges to the buyer (i.e. the shipping charges aren’t included in the sale price).

• There are no unusual scenarios, such as the buyer paying shipping fees directly to the carrier.

States that charge sales tax on shipping:

States that do not charge sales tax on shipping:

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