Louisiana Sales Tax Guide
Chapter 8: Understanding Louisiana sales tax rules for shipping & handling
Louisiana’s sales tax is low when compared to other states, just 4 percent, including a 3.97 percent general state sales tax and a .03 percent Louisiana Tourism Promotion District tax. With an increase in online purchases, however, many Louisiana businesses have questions about how the state’s sales tax applies to shipping, handling, and delivery in the state.Is Shipping Taxable in Louisiana?
As long as a Louisiana business states the shipping charge separately on an invoice, sales tax need not be applied. This is applicable whether items are delivered by a seller’s in-house vehicles, through a contract, or by a common carrier. If, for some reason, a business opts to absorb the shipping or delivery costs as part of the general sales total, that cost must be taxed. This especially applies to businesses that offer free shipping in order to win customer business.
However, in Louisiana shipping and delivery are only sales tax-exempt if shipping is an avoidable expense. If an item can be picked up by the buyer to avoid delivery fees yet the business still requires the item to be shipped, that business must charge sales tax on shipping. To offer shipping tax-free, the seller must allow the customer the option of turning down shipping in favor of either picking up the item or sending their own carrier.
Another exception to the shipping sales tax exemption comes when an item is shipped by a wholesaler. This customarily happens when a customer wants a product that the seller no longer has in stock. The seller will contact the wholesaler and ask for merchandise to be sent either to the seller’s place of business or the customer’s residence. In those cases, sales tax must be charged on shipping or delivery, even when the expense is stated separately on the invoice.Sales Tax on Handling
In Louisiana, handling is treated separately from shipping and delivery in that it is seen as part of the cost of bringing a product to market. Louisiana state sales tax must be charged on any part of a product’s sales price that is related to bringing it to market, including handling charges, which are considered service costs.
However, installation charges in the state are exempt from sales tax, as long as the charge is separately stated on the invoice. Examples given by the Louisiana Department of Revenue are the installation of an appliance or the setup of a mobile phone.Words of Wisdom
While Louisiana is clear on the requirements for shipping to be sales tax exempt, Louisiana Department of Revenue’s Kizzy Payton finds that many businesses assume sales tax never has to be paid on shipping and delivery. This is not always the case, she warns.
“Shipping from the point of sale to a place specified by the customer will generally be exempt,” Payton says. “However, shipping required to get the product to the place of sale is part of the sales price and subject to tax. Also, sometimes the invoice says ‘shipping and handling.’ Handling is subject to sales tax. When the shipping and handling is lumped into one price, the entire charge is taxable.”
If a business wants to ship an item without paying sales tax on the cost of delivery, it’s important to separate that charge out on the invoice. The item must be sent directly to the customer, and the customer must have the option of picking the item up instead of having it shipped. If a business can have customers personally pick items up to avoid paying the fee, the business must either offer that choice or pay sales tax on the cost of shipping.