Massachusetts Sales Tax Guide
Chapter 8: Understanding Massachusetts sales tax rules for shipping & handling
In Massachusetts, sales tax is 6.25 percent, and most out-of-state vendors are required to follow the same laws as in-state vendors. If they plan to sell tangible personal property, meals, or certain telecommunications services, they must register with the Massachusetts Department of Revenue as a vendor and pay 6.25 percent tax on every sale they make in the state.Is Shipping Taxable in Massachusetts?
Massachusetts, however, is one of many states that allow businesses to exclude shipping, handling, and delivery charges as long as these charges meet certain requirements. There are exceptions to the shipping sales tax exemption in Massachusetts, so it’s important that businesses learn as much as possible before they make online sales or arrange for items to be delivered to Massachusetts customers.Exempt Shipping and Delivery Charges
Massachusetts allows businesses to exempt the cost of getting items to customers as long as the charge is stated separately on the invoice.
There are some stipulations that come along with that, however. Not only does a business need to state the cost separately, but the delivery must occur after the purchase has already taken place. This means that there cannot be an agreement in place that allows the buyer to purchase the item once the goods have been delivered. If such an agreement exists, sales tax will need to be charged on shipping. The burden of proof is on the vendor that the transfer of ownership of the property happened before the property was delivered.
Businesses must also ensure that the shipping charges are reasonable, so businesses should stick as close to the actual shipping cost as possible when charging customers. Out-of-state shipping is also exempt from Massachusetts sales tax, whether those purchases are delivered by the business or by an interstate carrier. While in transit or being stored, property is exempt as long as it is not transferred to a customer within the state of Massachusetts as an end result.Handling Charges
Handling charges can be lumped in with shipping, making the entire charge tax-exempt under Massachusetts law. As with shipping charges, handling charges must be separately stated on the invoice, although it can be combined with shipping to be stated as “shipping and handling.” The handling charge must also be reasonable, with justification for the cost falling on the vendor if a question arises.
Alan LeBovidge, Massachusetts’s commissioner of revenue, emphasizes that to be exempt from tax, those charges must be reasonable. “Charges must generally lie within a range of prevailing charges for similar delivery services,” says LeBovidge. “A lump sum shipping and handling charge is reasonable only if it reflects, more or less, the actual shipping and handling costs incurred in making a delivery.”
Massachusetts can keep costs down by following the requirements to make those charges tax-exempt. When stated separately and kept at a reasonable rate, shipping, handling, and delivery charges can be free from sales tax in many of a business’s sales in Massachusetts.