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Are Shipping Charges Taxable?
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When determining whether or not shipping charges are taxable, things can get complicated. This is due to the fact that the answer depends on the state you live in. Sales tax is decided on, an administrated by, state governments only.
Is Shipping Taxed When Shopping Online?
When ordering from a shopping website online, the answer can get a little complicated. It depends primarily on the state in which you reside. Whether or not sales tax is going to be charged depends primarily on the buyer’s location. Many state governments have gotten wise to the Internet revolution and know they are losing tax revenue thanks to online sales. Amazon, for example, will collect sales tax in one state but not in another, and Walmart has to follow sales tax laws for every state they ship to because it operates brick-and-mortar locations in every state. The seller isn’t necessarily obligated to charge sales tax, but if you live in a state where the retailer has a physical presence, even a warehouse, then you are more likely to be paying sales tax.
States that Tax Shipping Charges
Sales tax is charged in some states instead of others, and some will charge tax on shipping while some don’t. There are 31 states that say if the charge for shipping is part of the order, then it is taxable. This doesn’t matter if the shipping charge is included in the item price, or if it is listed separately. There are some exceptions. In Florida, shipping may not be taxable if there are certain criteria met. For example, online purchases that are eligible for in-store pickup are exempt from sales tax on shipping, since you can avoid shipping altogether.
These states are:
- Arkansas
- Colorado
- Connecticut
- District of Columbia
- Florida
- Georgia
- Hawaii
- Illinois
- Indiana
- Kansas
- 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
- Wisconsin
States That Tax Shipping When Included in the Item Price
There are 14 states that say shipping charges are not taxable if the charge is separate from the price of the item. The shipping charges in this case are only taxable if they are charged as part of the price of the item. In Maryland and Virginia, if shipping and handling are combined, then it is taxable. Missouri is the newest state to be added to this list, and this change occurred in August 2017.
These states are:
- Alabama
- Arizona
- California
- Idaho
- Iowa
- Louisiana
- Maine
- Maryland
- Massachusetts
- Missouri
- Nevada
- Oklahoma
- Utah
- Virginia
- Wyoming
Shipping Tax Exceptions
Illinois is one of the most complicated states when it comes to shipping taxability, because there are a lot of factors that many consumers aren’t privy to. If a retailer is charging a flat $7.99 shipping fee, but actual shipping costs for the order are less, then the shipping fee is taxable. Even if shipping is a separate line item on the invoice, it doesn’t mean it’s separate from the items costs. The state figures that the shipping cost is part of the selling point, even if the invoice states otherwise. Illinois is also unclear if sellers need to charge sales tax if there is an in-store pickup option.
For customers that live in the five states without sales tax, including Montana, New Hampshire, Delaware, Alaska, and Oregon, there wouldn’t be any taxes on shipping charges or the item itself.
Is Shipping Taxed When Mailing From a Post Office?
When you’re at your nearest post office, there you may be wondering whether or not you will have to pay tax to ship out a package or to buy stamps. Postage and stamps from the US Postal Service are subject to sales tax because the post office isn’t run on a state level. Retailers will make up the cost of the postage from a customer at the selling point or in the shipping cost, which can be taxable depending on the state, as discussed above.
Online shoppers that want to avoid shipping charges that may or not be taxable can look for online stores that offer free shipping, depending on where you live. One good tip to keep in mind is that some websites of brick-and-mortal retail stores allow you to opt for in-store pickup in order to avoid shipping charges altogether.[/vc_column_text][/vc_column][/vc_row]