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Shipping, Handling, and Freight Tax Guide for Business Owners

Updated: Apr 30

Updated: April 5, 2024


When it comes to sales tax treatments, shipping, handling, and freight charges are often treated differently. Understanding the distinctions between these terms is crucial for businesses to accurately apply sales tax regulations. Let's delve into each of them, watch this video and stay ahead in your financial strategy!




Key Takeaways:

  1. Shipping Charges: Sales tax on shipping charges depends on whether the shipping is an integral part of the sale or a separate service. In many states, if shipping is a necessary part of the sale, it is generally taxable. 

  2. Handling Charges: Handling charges refer to fees associated with the labor or services required to handle and prepare products for shipment. The taxability of handling charges varies by state. In some states, handling charges that are considered an essential part of the sale could be subject to sales tax. However, if handling charges are separately stated and can be optional, there might be a possibility of exemption from sales tax.

  3. Freight Charges: Freight charges generally pertain to costs incurred for the transportation of goods from one location to another. The sales tax treatment of freight charges typically depends on the terms of the sale and state regulations. In some cases, freight charges may be subject to sales tax if they are considered part of the sale. However, if the sale contract separates the freight charges from the product itself, they might be exempt from sales tax.


It's important to note that sales tax laws and regulations can vary by state, and these treatments might differ depending on the jurisdiction. Therefore, businesses should consult their tax advisors or refer to the specific rules in their state to ensure accurate compliance with sales tax treatments for shipping, handling, and freight charges.  Knowing what your responsibilities are will save you in the long and short term.



 

Our mission to provide a resource so business owners, accountants and bookkeepers can understand sales & use tax compliance. We know that sales and use tax laws are not the easiest to understand. Our focus is on empowering you with a framework and general understanding, so you know what questions to ask and where to go to get the information you need to stay on the right side of sales and use tax compliance.




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