Sales Tax on Gift Wrapping?
- Sales Tax
- March 18, 2015 | Ryan O'Donnell
Gift wrapping is a product add-on many people don't think much about. However, wrapping tangible goods is a service and services are frequently taxed by state taxing authorities. Whether you're offering this service or wonder, as a consumer, about that sales tax you just paid, we have the answer for you below.
There are three key considerations when trying to understand gift wrapping taxability.
- The gift wrapping service
- The gift wrapping materials
- The connection between the seller and the wrapper
Like all things sales tax related, this varies by state so we've gone to each Department of Revenue website to get the most recent information. We've quoted the sites directly rather than summarize due to the complex language of state tax code. Need more info? The source is linked to the appropriate government web page.
Sales Tax on Gift Wrapping Services (Updated for 2015)
|Location||Gift Wrapping Taxed?||Notes (from state government website where possible)|
|California||Yes||"If you are wrapping products that you have sold in a nontaxable transaction, generally sales tax does not apply to your gift-wrapping charges. If you gift–wrap items that you did not sell or items that are taxable, all of your gift–wrapping charges–including charges for labor—are taxable. The quick reference table is intended as a general guide and can help you determine whether tax applies to your gift–wrapping charges." (source)|
|Florida||Yes||"Charges for gift wrapping and the taxability of materials used in gift wrapping." (source)|
|Hawaii||Yes||Gift wrapping is taxed at retail as determined under section 237-4, HRS, and section 18-237-4. (source)|
|Iowa||Yes||Wrapping services (gift wrapping or otherwise) are taxable in Iowa. (source)|
|Kansas||Yes||"Charges for services such as but not limited to: engraving, glass etching, gift wrapping, etc." (source)|
|Louisiana||Yes||"When the gift-wrapping service is not rendered in connection with the sale of the tangible personal property being wrapped, only the separately stated charge for gift-wrapping materials is subject to sales tax and the separately stated labor and service charge is not taxable. If no separation of charges is made, the entire charge is considered to be for the sale of tangible personal property and is taxable." (source)|
|Minnesota||Yes||"The entire charge for gift wrapping is taxable even if the charges for the gift wrap and for the labor are separately stated." (source)|
|Nebraska||Yes||"Any charge for a container, for wrapping an item, or filling a container, is taxable, except if the contents are sold at the same time and the contents are exempt, the charge is exempt." (source)|
|New Mexico||Yes||"Generally speaking, sales and leases of goods and other property, both tangible and intangible, are taxable. Unlike many other states, sales and performances of most services are taxable in New Mexico." (source)|
"When a vendor gift wraps an item which he sells, the paper, ribbon and bow become a part of the sale of the item notwithstanding that the wrapping of the item may take place at the point of delivery thereof to the vendee or at one of the vendor's wrapping stations or that the vendor may make a charge for gift wrapping the item. If a separate charge is made for wrapping, it is deemed to be for services performed in wrapping the item rather than a separate sale of wrapping material, and no sales or use tax will be due on the wrapping charge."
"When an organization, as a means of raising funds, offers to wrap gift items which were purchased from other vendors, the organization is considered to be performing a wrapping service and no tax is due on the service charge. However, tax is due on the cost of paper, ribbon and bows purchased for use in the performance of the service." (source)
"The purchase or use of wrapping supplies by a person engaged in the business of selling personal property is entitled to an exemption from tax upon the person’s purchase or use of wrapping supplies when the use is incidental to the delivery of property which he sells."
"If a vendor makes a charge for wrapping property, whether the vendor has sold the property wrapped or not, the vendor shall be deemed to have made a sale of the wrapping services which the purchaser receives. The vendor shall collect tax upon the purchase price of the wrapping services without deduction for labor, service or handling charges. If a vendor is required to collect tax under this subsection on charges made for the service of wrapping property, the vendor is entitled to a resale exemption on the purchase of wrapping supplies." (source)
|Rhode Island||Yes||"Tax applies to the entire charge for "gift wrapping" (i.e., furnishing the materials and labor required to wrap an item for a customer so as to be suitable for use as a gift), whether or not the person who does the gift wrapping is the seller of the contents, and whether or not a separate charge is made for the gift wrapping. The person who does the gift wrapping may purchase the materials free of tax for resale." (source)|
"Tax must be paid on the purchase price of gift wrapping by the person who provides the service whether or not the item being gift wrapped was sold by the person providing the service." (source)
"Tax must be collected on a charge for gift wrapping if the person who provides the gift wrapping service sold the item that is being wrapped and does not provide the service on a stand-alone basis." (source)
|Virginia||Yes (unless performed by a non-profit)||"...exempts from sales tax gift wrapping charges when such gift wrapping is performed by an organization conducted not for profit." (source)|
|Wisconsin||Yes||"The amount charged for gift wrapping packages is taxable." (source)|
|Wyoming||Yes||Gift wrapping services are taxable in Wyoming.|