You’re probably charging your clients for shipping or delivery costs at least some of the time as an online vendor.
Furthermore, each state’s sales tax and shipping regulations are not always clear and precise.
In this article, we’ll learn all about the sales tax on shipping or delivery costs. Let’s dive in.
Sales Shipping & Tax: Rules & Regulations
There is a sales tax in 45 US states and Washington, DC. However, each state is free to create its own sales tax rules and legislation.
As a result, if you want to charge sales tax to purchasers in a specific state, you’ll need to look at the state level.
Furthermore, if you look into each state’s taxation of delivery charges. Then, you’ll find it complex.
Because many state sales tax rules were enacted prior to the development of eCommerce, this is the case.
The letter of the law is frequently more concerned with mail-order transactions or deliveries made by business trucks or freight.
Fortunately, several states have recently issued guidance to online sellers. And, it can be in the form of a written ruling from the state’s revenue authority or a FAQ on the state’s website.
Common Sales Tax Exemptions for Shipping
Because many jurisdictions have variances to their regular regulations, we recommend checking each state’s sales tax law or shipping FAQ.
Here are a few examples:
You are delivering things in your own vehicle – ‘Common carriers’ are often referred to in state regulations on shipping taxability. Furthermore, in this example, a common carrier is a service that anybody can use, such as the US Postal Service, UPS, or FedEx. However, different shipping taxability requirements apply in some circumstances if you deliver products in your own vehicle rather than utilizing a common carrier.
You allow customers to pick up the goods — Because the delivery of the item is an inextricable aspect of the eCommerce process, several states insist that shipping in an eCommerce transaction is taxable. However, if you have a storefront or otherwise provide the consumer the choice of coming to your location and picking up the item, then the buyer is more likely to come to your site and pick up the item.
‘Handling’ is included — Shipping charges are not taxable in Virginia and Maryland. However, when combined “shipping and handling” charges are. Furthermore, to guarantee that your business procedure does not mistakenly run afoul of a technicality in the law, research your state’s sales tax legislation on shipping attentively.
Moreover, there is a mix of taxable and non-taxable products in the shipment. Moreover, some states exempt certain things from taxation. It includes groceries, clothing, and medications. In addition, the majority of the time, if you send taxable things, all shipping costs are taxable. However, if a parcel contains only non-taxable items, the shipping charges for that parcel are also non-taxable.
However, some jurisdictions indicate that if you ship a mixed shipment, you should only collect sales tax on the shipping charges used to deliver the taxable item. Moreover, you can do this by dividing the goods’ weights or costs, then applying a shipping charge to each one.
Hope this helped.
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