Do I Tax Shipping Costs in New York?
- Jan 22, 2016 | Suzanne Kearns
If you’re an ecommerce seller who is based in New York, or have nexus in the state, you’ll need to be aware of how the New York State Department of Taxation and Finance expects you to handle shipping charges. The state defines the term as anything that includes the shipping, handling, delivery, postage, or the transport of a product. Rather than having to read the long state statute yourself, let’s take a quick look at the highlights.
If the Product is Taxable…
If you are required to charge the customer sales tax on the product you’re selling, then according to the state, you should also charge NY sales tax on the shipping. But that only applies if:
- You charge the customer for the shipping on the invoice
- You handle the shipping yourself, hire a common carrier or other third party to deliver the product, or arrange for prepaid freight. But if the customer arranges the deliver with another party, you are not responsible for collecting the sales tax on it.
If the Product is Tax-Exempt…
If you sell a tax-exempt product to a customer, or the buyer presents you with a valid sales tax exemption certificate, you should not charge the buyer New York sales tax on the shipping or delivery of that tax-exempt product.
If the Order Consists of Taxable and Tax-Exempt Items…
Sometimes purchasers buy a combination of tax-exempt and taxable items and ask you to ship them. When this occurs, you’ll have to do a little math. The state asks that you allocate which portion of the shipment should be taxed and which portion is exempt. For example, if you’re shipping a coffee maker, which is taxable, and 10 pounds of coffee, which is not, you should determine how much of the shipping cost to apply to the coffee maker and only charge sales tax on that amount. The portion of the shipping that is allocated to the coffee should not be taxed. Do this by either price or weight.
Finally, remember that in addition to New York sales regulations, there are 84 local jurisdictions, and some of them have rules that differ from the state’s. If you encounter this situation, a representative from the NY Department of Taxation and Finances says that the local rules trump the state’s.