Florida Sales Tax Guide
Chapter 8: Understanding Florida sales tax rules for shipping & handling
Were you good at word problems in grade school math class? Then you’ll love Florida’s regulations governing sales taxes on shipping and handling.Is Shipping Taxable in Florida?
Like most states (and most everything in the world of sales and use tax), the answer is…it depends. There are a number of factors that impact whether the Florida Department of Revenue will require you to collect sales tax on shipping and handling. We’ll outline some of those situations below. As is always the case, specific questions on shipping in Florida and sales tax should be taken directly to a tax professional familiar with Florida tax laws.Customer Choice Matters
If you have tax nexus in Florida, then the question you have to answer to determine whether you should charge sales tax on shipping to a Florida customer is whether the customer has a choice. If your customer could pick up the order at your place of business instead of having it shipped, then the shipping is not taxable.
If your business is strictly what Florida quaintly calls “mail order,” then the state judges that the customer didn’t have a choice whether to have the order shipped. The customer could not avoid the shipping cost, so Florida considers it part of the sale price of the goods and thus subject to sales tax.
Another situation where shipping is not taxable in Florida is when the customer arranges for shipping on their own account and pays the shipping company directly.Following the Rule
Florida puts both shipping and handling into the category of “transportation charges,” so both are taxed — or not — by the same rules. However, if you lump shipping and handling together in one charge, the whole amount is subject to sales tax.
The same is true for personal delivery. If you take items to your customers in your own vehicle, whether your delivery charge is taxable or not depends on whether the purchaser had the option to pick up the item instead of having you deliver it. If it’s the customer’s choice, delivery is not subject to Florida sales tax. If delivery is the only option, it’s taxable.The FOB Exception
A representative from the Florida Department of Revenue (FDOR) pointed out that one important factor in determining the taxability of shipping on an order is whether or not the order was shipped FOB. FOB, which stands for Free On Board, has to do with when ownership of the goods is transferred from seller to buyer.
If ownership — and responsibility for the package — transfers to the buyer as soon as it leaves your hands, even if it hasn’t reached the buyer yet, the shipment is considered FOB. In that case, delivery is not taxable because it is at the behest of the buyer.
For example, a customer buys a washing machine at your appliance store and takes ownership of the machine on Monday. He asks you to deliver the washer on Tuesday in your delivery van. The customer already owns the item by the time of delivery, so your delivery charge is not taxable.Help for Florida Sales Tax on Shipping
If seller A places an order on a speeding train heading toward customer B in Florida and A tries to figure out whether to charge sales tax on the shipping and handling charges for the package, will A tear out all her hair by the end of the day?
Probably not, if A reads Florida’s handy FAC flyer about sales tax on transportation charges. The FDOR representative notes that the examples in this flyer “are very useful in understanding how Florida tax applies to shipping charges.” The flyer has examples of several different scenarios, so you will probably find one that applies to your business.
You may wish you had paid more attention to those logic problems, though, when you read sentences like, “E desires to purchase a hot water heater element from D. D must order the hot water heater element for E from a wholesaler. D requires E to pay the transportation charges only if E elects to have the item shipped directly from the wholesaler to E’s residence. E requests that D instruct the wholesaler to ship the hot water heater element directly to E’s residence.” Check out the webpage to find out how that cliffhanger ends.
If you still can’t figure out whether to collect and remit sales tax on shipping in Florida, you might find that sales tax automation software can save you some headaches — though it probably won’t solve word problems for you.