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Is Shipping Taxable?
With 29 states charging sales tax on shipping and complex rules varying by location, one mistake could cost you thousands in penalties and audits.
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Zamp Learnings
- Each state makes its own rules and laws on whether sales tax is charged on e-commerce shipping fees.
- Shipping is taxable in a little over half the US states with a sales tax.
- States that don’t charge tax on shipping charges generally require e-commerce sellers to separate out the shipping charge on the invoice.
- Shipping charges are generally only taxable if the items being shipped are also taxable.
When it comes to e-commerce, some states consider shipping charges to be a necessary part of the sale and consider them taxable. Other states say that, as long as the shipping charge is separately stated from the price of the item, then it isn’t taxable.
The trouble is that all of the forty-six states (plus the District of Columbia) that have a sales tax get to make their own rules and laws. So, there is no uniform rule of thumb when it comes to charging sales tax on shipping charges.
Today, we’ll explain the ins and outs of sales tax laws for which states require businesses to charge sales tax on shipping.
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Which States Charge Sales Tax on Shipping?
The below two lists sum up the taxability of shipping charges on “most” e-commerce sales. 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
*These states are exempt if by common courier.
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How to Stay Compliant With Sales Tax on Shipping
To handle sales tax on shipping like a pro, you need to start by following best practices to keep your company compliant. First off, always make sure you're calculating the tax accurately and applying it correctly. This means staying on top of the latest tax rates and rules in each state where you do business. Using sales tax software to automate these calculations can be a huge help and save you tons of time.
Another best practice is to double-check your shipping invoices to make sure that the correct amount of tax is being charged and collected. Mistakes can happen, so it's essential to review your records regularly to catch any errors and fix them promptly. Additionally, consider implementing a system that separates shipping and handling fees on invoices. This can help streamline the process and make it easier to track and report sales tax on shipping accurately.
Lastly, staying informed about changes in tax regulations is key to managing sales tax on shipping effectively. Tax laws can vary from state to state and can change over time, so it's important to stay vigilant and adapt accordingly. Consider subscribing to newsletters or joining industry forums where you can stay updated on the latest developments.
States Where Shipping Is Taxable: Conclusion
It’s no secret that consumers want fast and reliable shipping. They also want their items taxed correctly, especially if they have to pay sales tax on shipping costs. An automated sales tax solution lets you collect, remit, and file sales tax effectively so you get it right the first time.
Why Choose Zamp?
Zamp is a completely managed solution that handles the full sales tax lifecycle for you. From the initial onboarding process to staying updated with the latest changes in sales tax regulations, we handle it all.
Our automation tools streamline the entire compliance process, allowing you to focus on growing your business while we take care of the nitty-gritty details. With our commitment to accuracy and reliability, you can trust Zamp to keep your business compliant and free from the burden of managing sales tax.
Schedule a demo with Zamp today and discover how our solutions can revolutionize your business operations. Reach out to our team of experts and experience the freedom of seamless sales tax management with Zamp.
Get Help for Your Company
We'll answer all of your sales tax questions & address any of your concerns to ensure that you never have to worry about sales tax again
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Book a
30-minute call
30-minute call
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Meet with a
sales tax expert
sales tax expert
3
Sales tax
off your plate
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Is Sales Tax Charged on Shipping?: FAQ
Sales tax on shipping refers to the additional tax charged on the cost of shipping items to customers. It is separate from the sales tax on the actual products being purchased.
The requirement to charge sales tax on shipping varies depending on the state and the type of transaction. In some states, shipping charges are taxable, while in others, they may be exempt under certain conditions.
Determining whether shipping is taxable depends on various factors, including the destination of the shipment and the applicable state laws. It’s essential to familiarize yourself with the specific regulations in each state where you do business.
Yes, several states, including New Jersey, New York, and Texas, charge sales tax on shipping.
In a destination-based e-commerce transaction, your customer’s location is the point of taxation. This is generally known as the shipping address, which your business would use to calculate sales tax.
Yes, some states offer exemptions or reduced rates for sales tax on shipping. For example, certain types of shipments, such as those for resale or for specific industries, may be exempt from sales tax on shipping charges.
It’s important to stay informed in order to stay compliant with sales tax regulations. And, using sales tax automation tools and consulting with tax professionals can help navigate the complexities of sales tax on shipping.
About the author
Emily Kordys Emily Kordys is a Content Marketing Manager with seven years of experience in the sales tax, auto, and real estate industries. She currently resides in North Carolina with her boyfriend and dogs, Shadow and Copr.
