Indiana Sales Tax Guide
Chapter 8: Understanding Indiana sales tax rules for shipping & handling
When you think of Indiana, do you think of a mail carrier from a Norman Rockwell painting? The state’s charming rules about sales tax on shipping harken back to a more wholesome time that brings this image to mind. Here’s what you need to know.Is Shipping Taxable in Indiana?
Indiana defines delivery charges as “transportation, shipping, crating, handling, [and] packing,” plus any postage costs you include in the sale price (i.e., postage that’s not stated on a separate line on your invoice). These charges are all subject to sales taxes.
Delivery through the US Mail is not subject to sales tax in Indiana, as long you state the amount of postage separately on your invoice and you pass only the actual postage charges on to the customer. So if you ship your order through one of the services offered by the post office, you can avoid charging your customers sales tax on shipping. Indiana is a USPS booster!
Handling charges are taxable, whether or not they are stated separately. If you bundle shipping and handling together, that amount is taxable even if the US Post Office is your shipper of choice.FOB or Not FOB
Whether or not you ship to your customers FOB (meaning that the customer takes possession of the item at your location), shipping charges other than US Mail that you incur on behalf of your customer and charge to your customer are taxable. This rule applies to charges for personal delivery in your vehicle as well.
The only exception is if your customer makes separate arrangements with a third-party shipper to have the items picked up from your location and delivered. In that case, shipping is not taxable –- but you don’t care, because you’re not involved in that transaction anyway.Shipping Tax-Exempt Orders
If you ship an order composed of tax-exempt items, all the associated charges are also exempt, including shipping and handling.
But if your order contains a mix of taxable and exempt items, the Indiana Department of Revenue (IDOR) advises that you should only tax the shipping fees that correspond to the taxable portion of the package.Don’t Fret About Freight In
The IDOR reminds sellers that “[a]ny charges before the purchaser actually receives the property are taxable unless a specific exemption exists.” In other words, if you pass on the cost to ship goods to you (freight in) to your customers, that charge is always subject to sales tax, as is the case in most states.Heartland Sensibility in Indiana
To recap, handling charges are always taxable in Indiana. You will need to collect and remit sales taxes on shipping, unless you mail your orders through the US Postal Service and pass through the postage at cost on a separate invoice line.
It’s easy to print out postage online, but doesn’t Indiana make you want to run down to the post office and buy a bunch of colorful stamps with birds or flowers to decorate your packages?
Not all states are as warm and fuzzy as Indiana. In the wild and wooly world of sales tax compliance, automation software might save you time and headaches.