Are Shipping Charges Taxable In Texas – Ready or not, the holidays are here. It’s the busiest time of the year for most retailers — and usually involves huge amounts of shipping. Checking the state sales tax rules for shipping and handling charges seems fine.
There are two ways for sellers to handle shipping and handling charges: enter them separately on the invoice or bill of sale, or include them. If separately stated, taxation generally depends on whether these charges are taxable in the state. The general rule of thumb in many states for included shipping charges is as follows:
Are Shipping Charges Taxable In Texas
But that’s only the tip of the iceberg, as there are exceptions to every rule when sales tax is included. Furthermore, some states have different rules for different situations.
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Alabama: Deliveries made in a vehicle leased or owned by the seller are generally taxable in Alabama, while separately stated transportation charges for shipments made by common carrier are exempt when paid (direct or indirectly) by the consumer.
Arizona: Delivery charges for exempt sales are generally excluded in Arizona, whether separately stated or included. For taxable sales, separately stated delivery charges are excluded but delivery charges included are taxable. Handling charges are always taxable, as are combined shipping and handling charges.
Arkansas: Delivery charges are considered part of the gross receipts or gross income of a sale in Arkansas. If the sale is taxable, delivery charges are generally taxable; if the sale is exempt, delivery charges are generally not included. If a shipment includes both taxable and exempt property, tax is applied at the percentage of the delivery charge allocated to the taxable property.
California: Generally, if the sale is not taxable, the associated delivery charges are not taxable; if the sale is taxable, the charges associated with the delivery may be non-taxable, partially taxable, or fully taxable.
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Colorado: Delivery and freight charges for taxable sales are generally taxable in Colorado if included but not included if “separable from the purchase and separately stated” on the invoice. “Separable” means that the charge is added after the property is sold and the consumer has a choice (ie, the consumer can use an alternative mode of transportation). Delivery charges associated with exempt sales are generally not included. Different rules may apply for local sales tax.
Connecticut: Shipping and handling charges for taxable sales are taxable in Connecticut whether separately stated or included, and whether provided by the seller or a third party. Shipping and handling charges for exempt sales are generally not included.
Florida: Transportation charges for taxable sales are generally taxable whether separately stated or included. However, separately stated shipping charges that can be avoided (by having the customer handle shipping) are not included in Florida.
Georgia: Generally, delivery, freight, transportation, shipping, and handling charges for taxable sales are taxable in Georgia, whether separately stated or included. Delivery charges for exempt sales are generally not included.
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Hawaii: Hawaii’s general excise tax (GET) is a privilege tax imposed on business activity in Hawaii. This generally applies to most transactions, including most shipping and handling fees. In the rare event that a sale is excluded, the associated shipping charges are generally excluded.
Idaho: Shipping and handling charges included in the sale price are generally taxable when the sale is taxable and excluded when the sale is exempt. Separately stated charges to deliver goods to the buyer via the retailer’s delivery van are generally exempt in Idaho.
Illinois: Transportation and delivery charges are considered part of the sale in Illinois when there is an “inseparable link” between the sale of tangible personal property and the delivery of the property; in such cases, the delivery is taxable when the sale is taxable and exempt when the sale is exempt. An inseparable link exists when delivery charges are not separately specified in the contract or invoice, or the seller does not offer the buyer a delivery option (eg, allowing the customer to take possession -property). When there is no inseparable link, transportation and delivery charges are considered separate from the sale and not taxable.
Indiana: Generally, delivery charges for taxable goods in Indiana are taxable when included in the sale. However, separately stated “postage charges” (the purchase price of stamps or similar charges for delivery of mail or parcels through the U.S.) are not taxable. Delivery charges charged and provided by a third party are also exempt, as are charges to deliver exempt sales.
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Iowa: Separately stated delivery charges are generally not included in Iowa. However, “freight-in,” the charge for the seller to obtain the merchandise sold to the customer, is taxable if passed on to the customer.
Kansas: Generally, shipping and handling charges are considered part of the sales price in Kansas; as such, they are taxable for taxable sales and are not included in exempt sales.
Kentucky: Delivery charges (retailer’s charges for preparation and delivery to a location designated by the buyer) are included in the sale price and subject to tax if the sale is taxable, and are not included if the sale is exempt . However, delivery charges in Kentucky are generally exempt when charged by companies not in the business of selling tangible personal property.
Louisiana: Separately stated shipping and handling charges are generally exempt from state sales tax in Louisiana, if delivered by seller’s, third party’s, or common carrier’s vehicles. For taxable sales, delivery and shipping charges included in the sales price are generally subject to state sales tax. Sellers can only claim the delivery charge separately if the buyer can avoid it (ie by taking the goods). Different rules may apply for local sales tax.
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Maine: Generally, separately stated charges to deliver tangible personal property are exempt from Maine sales tax if the shipment goes directly to the buyer and the transportation occurs by common carrier, contract carrier, or in the U.S. mail. Shipping charges included in the price of a taxable sale are generally taxable.
Maryland: Delivery charges included in the taxable price are generally taxable in Maryland, while separately stated delivery charges are not taxable. However, handling charges cannot be separately stated, so if the sale is taxable, handling charges are taxable. When shipping and handling charges are combined, the shipping charge is exempt and the entire charge is taxable.
Massachusetts: Shipping and handling charges stated separately are exempt from Massachusetts sales and use tax, provided delivery occurs after purchase is made. Handling charges may be included in shipping charges; unless otherwise noted, “shipping and handling” charges are excluded. Note: The shipping charge must be “reasonable.”
Michigan: Shipping and handling charges on taxable retail sales are generally taxable in Michigan, including when incurred prior to the transfer of ownership of the property. However, the taxability of separately stated delivery charges may depend on when ownership is transferred to the buyer (eg, charges for delivery by common carrier are excluded if ownership of property is transferred to the buyer before shipment). When there is a single transport charge for both taxable and exempt goods, the tax is applied on a percentage of the taxable sale (determined by price or weight).
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Minnesota: Taxation of shipping, handling, and delivery charges depends on the method of delivery in Minnesota. If a business delivers the goods itself, the charges are considered part of the sales price (ie, taxable if the sale is taxable, and exempt if the sale is exempt). If the sale includes both taxable and exempt goods, the tax must be charged based on the percentage (or weight) of the taxable goods. When goods are shipped via common carrier or a third-party delivery service, shipping and handling charges are generally not included. Special rules apply to the delivery of aggregate materials and concrete blocks.
Mississippi: Charges for shipping, handling, and delivery of taxable goods are generally subject to Mississippi sales tax.
Missouri: Transportation charges for taxable goods are generally taxable in Missouri when included in the sale price or when the buyer is required to pay them. Separately stated transportation charges are generally not included if the buyer is not required to pay for the service. However, if the buyer is not required to pay for transportation charges but they are not separately stated, they are taxable.
The buyer contracts with and pays a freight company or the U.S. Post Office separately for delivery. Separately stated delivery charges for U.S. postage. for direct mail delivery is also exempt.
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Nevada: Services necessary to complete the sale of tangible personal property are taxable in Nevada, so transportation charges included in the sale price of taxable goods are taxable. However, separately stated delivery, freight, and transportation charges in Nevada are generally not included. Administrative charges are taxable whether separately stated or included.
New Jersey: Delivery and handling charges on taxable sales are generally taxable in New Jersey, while delivery and handling charges for exempt sales are generally exempt. When a shipment includes both taxable and nontaxable sales, the seller must tax the portion of the delivery charge allocated to the transportation of taxable goods (determined by weight or price). If the seller does not allocate the delivery charge, the full charge will be taxable.
New Mexico: Gross receipts tax applies to delivery and shipping charges (including postage and transportation charges) in New Mexico, whether separate
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