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Is it Legal to Charge Sales Tax on Shipping and Handling?
August 17, 2015
In a nutshell: It is legal and required in some states to charge sales tax on shipping and handling charges. Some states require sales tax on delivery charges only in special cases and some don’t require sales tax on shipping charges at all.
TaxJar is a service to help merchants take the hassle out of sales tax. But we love to blog about all kinds of sales tax topics, and sometimes our blog posts attract questions from the merely curious. And we’re happy to hear what’s on your mind!
One of the things that has been coming up in our blog comments is whether or not it’s “legal” for a business to charge sales tax on the shipping and handling charges.
As a frequent online shopper myself, I feel your pain.
There’s nothing worse than buying an item for $10, getting an additional $5.99 charge for shipping and then seeing sales tax added on to the whole shebang! (And I live in an area in Georgia that has a relatively low sales tax rate compared to the rest of the country.)
But, unfortunately, the merchant isn’t charging sales tax on shipping charges just to get more money from you. After all, sales tax is a pass-through tax, so they don’t get to keep the money anyway! Some states actually consider shipping and handling a part of the taxable price of an item. In their thinking, if you bought it online then you have to have it shipped to you, meaning that shipping is all part of the price.
Other states take the stance that shipping is only taxable if the shipping (and sometimes handling) price is not separately stated on the invoice. So if you buy an item for $10 and the $2.00 in shipping is stated separately, then you would only pay sales tax on the $10 and not the shipping charge.
Other states consider any shipping charges that are higher than your actual cost to ship the item to be taxable. For example, say you sell a book on eBay and charge your customer $5.00 in shipping but it only costs you $3.00 to ship the book. That $2.00 extra would be taxable.
Sales tax can be confusing, but for more information on sales tax on shipping (including which states require it and which states do not!) check out our “Is Shipping Taxable?” guide.