Do I Tax Shipping Costs in Pennsylvania?
- Mar 25, 2016 | Laura McCamy
Many states consider shipping a separate, non-taxable charge, as long as you write it on a separate line on your invoice and pass on only your actual shipping cost to your customer. More and more states, however, require sellers to charge sales tax on shipping in some or all situations. The answer to when you need to tax shipping costs in Pennsylvania, for example, is: always.
As sales have moved from local brick-and-mortar shops, states and cities feel the pinch of decreased sales tax revenue. With ecommerce taking an ever-larger share of the retail market, states are looking for creative ways to take back some of that lost sales tax revenue.
One way is to collect sales tax on shipping charges. Shipping as a service is free from sales tax when you contract directly with the shipping company. FedEx, UPS, the Postal Service and other shippers do not add sales tax to their shipping charges. If you’re a seller, however, when you ship a package to a customer you will need to tax shipping costs in Pennsylvania.
There is one exception to this rule: If the items you are shipping are not subject to sales tax, then you don’t need to tax shipping costs in Pennsylvania either. If the shipment contains a mixture of taxable and nontaxable items, the entire shipping charge is subject to sales tax.
One thing to note: Handling charges are taxable in PA, as long as the products in the order are also taxable.
Don’t let the tangle of state sales tax regulations get you down. Small business sales tax compliance software is available to lend a helping hand.