Delivery charges includes charges for shipping and handling, postage, freight, transportation, drayage, transfer, crating, packing, wrapping, parcel post, portage, loading, rigging, lading, tonnage, weight, burden, documentation, etc. Delivery charges can vary by weight, size, fragility, and speed of shipping.
Does sales tax apply to delivery charges?
It depends. Sales tax applies when the seller adds delivery charges on products that are subject to sales tax. Delivery charges by a seller are part of the selling price whether they are billed separately, itemized, or the seller is also the carrier. If the seller is responsible for the cost of delivery, they may not deduct or exclude the delivery charges.
Does sales tax apply to delivery charges when the items sold are not subject to retail sales tax?
No. If the sale is exempt from retail sales tax, then the selling price including the delivery charge is not subject to retail sales tax.
Does sales tax apply to delivery charges when the items are sold at wholesale?
No. If the items are sold at wholesale, then the delivery charge is not subject to retail sales tax. However, the charges would be included in the gross income that is subject to B&O tax under the Wholesaling classification.
Does sales tax apply to delivery charges when the sale includes taxable and nontaxable goods?
Yes. If the delivery charges are included in the selling price, then retail sales tax will only be applied to the percentage of the delivery charges on the taxable goods.
To determine what percentage of the delivery charge is taxable, the seller may use one of the following calculations:
- A percentage based on the total sales price of the taxable goods, compared to the total sales price of all the goods in the shipment.
- A percentage based on the total weight of the taxable goods, compared to the total weight of all goods in the shipment.
If the selling price did not include sales tax on a product subject to sales tax, then use tax is due. The amount subject to use tax includes the delivery charge paid, or the amount given to the seller, or the amount given on behalf of the seller.