Do I Charge Tax On Shipping Costs in Georgia?
- May 14, 2016 | Laura McCamy
To find out when shipping is and is not taxable for ecommerce sellers based in Georgia, let’s take a look at a hypothetical business. Marissa from Macon makes Georgia Botanicals, a line of peach-scented body lotions, at her kitchen table. At the beginning, she just sells them to her friends and coworkers.
Then one day, her Peachy Baby Lotion shows up on a local morning show. One of the hosts got it as a gift and raves about it. Marissa puts up a website and a few orders trickle in, mostly from people in the Macon area. When she ships orders to her customers in Macon, she charges sales tax on her Peachy Clean Body Wash, Soft as a Peach Face Cream, and Peachtree Hand Lotion. She adds shipping to these orders and she also charges sales tax on the shipping, because shipping is taxable in Georgia.
Word starts to spread and Marissa gets a call from a small chain of body product stores in Atlanta. They want to order several cases of Georgia Botanicals Peach Blossom Shampoo and Conditioner. Marissa doesn’t charge the store any sales tax because this is a wholesale order. The store submitted its exemption certificate for Marissa's files. Because the product is tax-exempt, the shipping is also tax-exempt. When the order is tax-free in Georgia, so is the shipping.
Next, Marissa gets a call from a women’s magazine. They want to feature her products in a spread for their June issue that will also list her online store address. She sends off her product for the photo shoot and forgets all about it. Then the magazine hits the newsstands at the end of May, and the Georgia Botanicals online store lights up with orders from all over the United States. Marissa is shipping Peach Pit Face Scrub to New York and Peach Bunny Sunscreen to California.
When she ships orders to customers out of state, Marissa doesn’t charge them any tax on the product or the shipping, since she is still, amazingly, making all her products in her kitchen in Macon, so she hasn't established sales tax nexus in any other states. Needless to say, her family eats a lot of takeout these days.
Marissa did everything right. She registered to collect GA sales tax. She researched what was taxable in Georgia so she knew she needed to add sales tax to her shipping charges. When it comes time to file her next sales tax return, she’ll have collected the exact amount she owes. Pretty peachy sales tax compliance!