Determining whether shipping charges are taxable can be a maze of regulations and exceptions. To simplify this, let's break down some general rules and dive into specific state considerations.
General Guidelines
- If the contents of the shipment are taxable, shipping charges are taxable.
- If the contents are exempt, shipping charges are typically exempt.
- For shipments with both exempt and taxable products, allocate taxes accordingly.
State-Specific Taxation
When Shipping Charges are Taxed
Several states tax shipping costs as part of an order. This applies whether the shipping charge is included in the item's price or listed separately. States include Arkansas, Connecticut, District of Columbia, Georgia, Hawaii, Illinois, Indiana, Kentucky, Michigan, Minnesota, Mississippi, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Vermont, Washington, West Virginia, and Wisconsin.
When Shipping Charges are Not Taxed
Conversely, certain states do not tax common carrier shipping costs if the shipping cost is shown separately from the item's price. These states include Alabama, Arizona, California, Colorado, Florida, Idaho, Iowa, Louisiana, Maine, Maryland, Massachusetts, Missouri, Nevada, Oklahoma, Utah, Virginia, and Wyoming.
Special Considerations in Specific States
- Idaho, Louisiana, Maine, and Utah: If a seller orders an item from the manufacturer and ships it to the customer, the shipping cost may be taxable. However, if the manufacturer ships it directly to the customer, the shipping cost is generally not taxable.
Recent Exemptions
- Kansas (from July 1, 2023): Delivery charges separately stated on an invoice are no longer subject to Kansas sales tax.
- Michigan (from April 26, 2023): Most delivery charges and installation fees become exempt from Michigan sales and use tax, provided they are separately itemized on the customer's invoice.
Conclusion
Understanding these nuances is crucial for accurate sales tax compliance. If you have questions or need assistance navigating the complexities of sales tax on shipping charges, our team is here to help. Stay informed, stay compliant!
.png)
.png)
