Are Shipping Costs Taxable in New York?
- Sales Tax
- January 9, 2017 | Suzanne Kearns
If you do business in New York, you’re already aware of the basics regarding sales tax, but do you know the New York’s Department of Taxation and Finance sales tax rules for shipping products into New York? This area can be confusing because each state has different regulations on the subject.
So let’s clear up the confusion about whether or not shipping into New York is taxable.
How New York Defines Shipping
In New York, the term “shipping and delivery” includes the transportation, handling, or postage charges involved in getting products to consumers. It’s important to note that if a customer arranges for delivery of your products with a third party carrier and that charge is billed on a separate invoice, you are not responsible for sales tax on the transaction in the eyes of the Department of Taxation and Finance.
You Should Collect Sales Tax for Shipping on Taxable Items
If the item you’re shipping is taxable, New York expects you to collect sales tax on the shipping and delivery of that item, but only if it’s included on the invoice. This includes any shipping and delivery charges that involve delivery with company vehicles, common carrier deliveries arranged by the seller, prepaid shipping charges such as when a drop shipper is involved, and postage charged by the seller to ship an item to the purchaser. In other words, anytime the shipping and delivery charges are included on the invoice for taxable items, sales tax should be collected.
You Should Not Collect Sales Tax for Shipping for Non-Taxable Items
If you sell products that are not taxable, you should not collect sales tax on the shipping charges for those products. For example, if you sell specialty bagels and charge the customer a delivery fee, you should not collect sales tax on that fee.
In addition, you should not charge sales tax for the shipping of items when the customer provides you with a resale certificate because that is considered a non-taxable sale.
Things get Complicated When Shipping both Taxable and Non-Taxable Items
Although New York has many rules when it comes to shipping taxable and non-taxable items together, they make it pretty easy to understand. Here’s how it breaks down:
- When you’re shipping a combination of taxable and nontaxable items and include both of them on the same invoice along with the shipping charge, the entire bill is taxable, including the shipping charges.
- When the taxable and non-taxable items are listed separately on an invoice, but only one shipping charge is included, you will have to collect sales tax on the shipping charge.
- If you fairly allocate the shipping charges between the taxable and non-taxable items on the invoice, then you should only collect sales tax for the taxable product’s shipping charges.
The taxation of shipping charges in New York doesn’t have to be complicated if you follow the simple rules listed above.