Maine Sales Tax Guide
Chapter 8: Understanding Maine sales tax rules for shipping & handling
For businesses that have nexus in Maine, it’s important to pay particular attention to who you’re shipping to and how you’re shipping, since those factors affect whether those charges are taxed.
Maine’s sales tax is low compared to many other states, set at just 5.5 percent. However, residents pay more taxes on certain items that the state deems recreational, including prepared food, lodging, and liquor. Tracking and separating the various rates can be complicated, and those complications continue when it comes to shipping, handling, and delivery.Is Shipping Taxable in Maine?
In Maine, sales tax is charged on the full amount of the purchase, including any services required to put that order together. However, transportation costs are sales tax-exempt, and this includes any shipping and handling fees a business passes on to customers. In order to eliminate sales tax from handling and transportation fees, a business must meet the following criteria.
- The shipment must be made directly from the business to the purchaser.
- Handling and transportation costs must be separated from the sales price on some verifiable form of documentation.
- Transportation must be provided either by a common carrier, contract carrier, or the U.S. Postal Service.
In other words, if a business ships an item to a reseller, who then sells it to a customer, the transportation and handling cost is considered part of the sales price. This is important for independent consultants who place orders on behalf of multiple customers and receive shipments to distribute.
Maine does not require that the shipping costs be separated out on the customer invoice. Instead, the Department of Revenue notes that any verifiable document that separates the cost and can be provided in the event of an audit will suffice.Delivery by Business Vehicles
Maine does not allow businesses to exempt transportation costs from sales tax when that transportation is provided by the business itself. For businesses that maintain their own vehicles for delivery purposes, delivery and handling costs are considered part of the sales price and must then be taxed at the regular rate.
In an instance where part of an order has tax-exempt status, transportation costs may be partially exempt from sales tax on that portion of the order. If taxable products make up less than ten percent of the entire order, Maine grants “de minimis” status to the entire order and allows the business to ship without paying sales tax on transportation costs.Special Exceptions
In Maine, businesses benefit from special tax exemptions on the products they use for shipping. Under state law § 1760(12-A), sales of containers, boxes, crates, bags, labels, and other packaging materials are exempt when used to ship goods to customers. This also includes items used to ensure items arrive in working condition, including dry ice.
There are also special laws that apply to out-of-state delivery of goods. When a business delivers items across state lines, the cost of delivering those goods is tax-exempt in Maine. This holds true whether the item is shipped by common carrier or personally delivered by the business’s vehicles.Required Criteria
For businesses selling in Maine, the exemptions can sometimes be confusing. As David Heidrich, Jr., assistant director of communications for the state’s Department of Administrative and Financial Services, points out, three criteria must be met before taxable products can qualify for an exemption on shipping. The shipping charge is exempt if: (1) the product is delivered directly to the customer, (2) the shipping charge is separately stated, and the (3) shipment is by common carrier.
“However, there are instances where shipping and delivery charges are subject to sales tax,” Heidrich emphasizes. “In particular, retailers should be aware of any situations that would fail any of the three previously mentioned tests.”
For example, if a customer special-orders a product, which is delivered to the store for customer pick-up, the situation fails the first test — the product was not delivered directly to the customer. If the shipping charge is combined with handling charges, it fails the second test since the shipping charge is not separately stated. Finally, if delivery is made with the retailer’s own vehicle, the delivery charge fails the final test – the shipment was not made by a common or contract carrier.