The New York State Department of Taxation and Finance has released Tax Bulletin ST-838 (TB-ST-838) regarding the taxability of shipping and delivery charges.
According to the bulletin, “…charges for shipping or delivery that a seller includes on its bill are taxable if the product or service that is being shipped or delivered is taxable. The terms shipping and delivery also include charges identified by terms such as transportation, handling, or postage.”
Example: A customer purchases a clothes dryer (including a service contract) from a major department store chain that has its own delivery vehicles. The department store delivers the appliance to the customer’s home and charges $20.00 for delivery. The store issues the following bill to the customer:
Appliance $499.95
Service contract 30.00
Delivery charge 20.00
Total (before sales tax) $549.95
Sales tax must be computed on the total charge of $549.95.
Example: A customer purchases a table and chairs from a custom furniture maker and requests that the items be delivered. The furniture maker contracts with a common carrier to transport the furniture to the customer’s home. The furniture maker issues the following bill to the customer:
Table and chairs $3,500.00
Transportation 250.00
Total (before sales tax) $3,750.00
Sales tax must be computed on the total charge of $3,750.00.
Example: A contractor purchases lumber from a broker. The contract provides that the lumber will be drop-shipped from a producer’s mill in Washington to the job site in New York and prepaid transportation charges will be included. The broker issues the following bill to the customer:
1000 board feet of 2x4's $400.00
Prepaid freight 100.00
Total (before sales tax) $500.00
Sales tax must be computed on the total charge of $500.00.
Example: A person in Albany sends his watch to a jeweler in New York City to be repaired. After being repaired, the watch is shipped back to Albany. The jeweler’s bill lists the charge for the repair service and also a charge for shipping. Sales tax is due on the total amount paid for the taxable repair service, including the shipping charge.
If a customer arranges for their own transportation such as paying a third party independently to pick up and deliver the items, then transportation alone is not taxable.
Taxable and nontaxable charges
When sales include both taxable and nontaxable charges, it depends on how the invoice is written up. If the invoice has a single charge on the bill, then “…the entire bill is taxable, including any shipping or delivery charges.”
However, if the items are listed separately on the bill, sales tax is not collected on the non-taxable items but if “…only one charge for shipping or delivery is listed on the bill, the entire delivery charge is treated as part of the taxable portion of the bill.” If the shipping and delivery charges are allocated to each item on the invoice, “…then only the shipping or delivery charge allocated to the taxable products on the bill is taxable.”
Nontaxable products or services
For nontaxable products or services, the bulletin states that “…any charge to the customer for shipping or delivery is also not taxable.”
Learn more of the details by reading Tax Bulletin ST-838 (TB-ST-838).
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