eCommerce Sales Tax 101 Shipping

Is Shipping Taxable?

by Mark Faggiano

Shipping Taxability eCommerce

Frequently Asked Question: Are shipping charges taxable?

Answer: It depends.

Like almost everything else in sales tax, the laws around taxability of shipping charges you pass along to your customers is not universal. Some states say it’s taxable. Others say it’s not. Imagine how much easier sales tax would be if the states worked together? This post is for online sellers who need some guidance on how each state handles shipping charges. Sort through the list below to find your state as well as other states in which you have sales tax nexus. Here are some important assumptions to keep in mind as you use this list:

  • You’re an eCommerce seller, not a traditional brick-and-mortar merchant
  • You’re delivering items to your customers via common carrier (USPS, etc)
  • You’re not delivering items yourself using your own vehicle. States may have entirely different rules for that scenario.
  • You’re shipping taxable items to customers within your state. For example, you live in Georgia and are shipping a taxable item to a customer in Georgia.
  • If you have more specific scenarios not covered by these assumptions, you’re best option is to talk to a representative in your state.

States Where Shipping is Taxable

The following states say if you charge for shipping as part of an order then it’s taxable. It doesn’t matter if the shipping charge is part of the price of the item or if it’s listed separately from the price of the item.

States Where Shipping is Not Taxable if Separately Stated

These states say shipping charges are not taxable if you show the charge separately from the selling price of the item. They are taxable if you include the charge as part of the price of the item.

Feedback? Comments? Share them with us in the discussion group below or on our Facebook group dedicated to sales tax.

  • PSand

    Actually, in Illinois, you are required to charge tax on shipping. See Illinois Wal-Mart case, Nov 21, 2008 (Nancy Kean v. Wal-Mart Stores, Inc.) No. 1-07-1341.

    • Mark Faggiano

      The state of Illinois will say otherwise. According to their website (and the folks employed on the Department of Revenue) shipping is only taxable if it’s included in the price of the item. They state very specifically that shipping is not taxable if it is separately states on the bill or invoice.

      • PSand

        I understand that, but we are currently undergoing an audit, and the Wal-mart case is very specific, and is being referenced by the auditor. Imagine our surprise when we found out that IDOR’s guidance is wrong and is not what is used by their auditors! Paraphrasing the judge in the Wal-mart case – “It doesn’t matter if IDOR says shipping is not taxable. Shipping is taxable.” I will email the case to you if I can locate your email address.

        • Mark Faggiano

          I even called the state again and they still say it’s not taxable if separately stated.

          Thanks for the info, PSand. Scary stuff when the state says one thing and the auditor the exact opposite.

          • uggh

            we are being sued for said case and we are forced to pay and change our sites to charge sales tax on shipping – you see whislteblower law nets IL 70% of the money received – so why should they make a decision.

          • Mark Faggiano

            So the state told you that shipping IS taxble in Illinois as well?

          • uggh

            Nope -the state is being quiet on it – problem is IL supreme court judge says charge tax – IDOR has no clear decision – the courts will side with the legal case so bussinesses cannot win if pushed to trial –

          • Jennifer Dunn @ TaxJar

            Hi there, We investigated this one further and put up a blog post about it. Here it is: Please share with your Illinois eCommerce seller colleagues and ask them to comment if they’ve found anything different. Thanks!

      • Anni

        The separately stated shipping must reflect the seller’s actual shipping cost. Any upcharge on the shipping is taxable.

  • anja

    Hi! What if I had an warehouse in Indiana and would deliver to a customer in Forida? I would not have to charge sales tax on the articles because I have no nexus in Florida. But do I have to charge that customer taxes on the shipping cost because shipping in Indiana is taxable. Or is tax on shipping only valid for me when I deliver within Indiana?

    • Mark Faggiano

      Based on what you’re telling me above, you would only collect sales tax on items shipped to customers in Indiana. Yes, shipping is taxable in Indiana. You would not collect any tax on items sent to Florida, not even for shipping.

      • Richard Bushard

        As of 7/1/13 Indiana does not collect sales tax on shipping as long as it is listed separately. However some out of state retailers are still collecting sales tax on the shipping charge and I think they are doing so on old information.

  • Joyce

    My company was audited by the Illinois around two years ago. We do not collect sales tax on shipping. We had no issue with shipping, it was not taxable. The audit went smoothly, we owed no money. In fact we got a refund!!!
    Best audit ever…the worst was the state of California.

  • no name

    Can’t see how the State thinks they can ask me to charge sales tax on postage purchased from the Federal Government (USPS). I don’t pay State sales tax on stamps, why would postage purchased online be any different? Should I just be buying LOTS of stamps and just sticking them on everything I ship?

    • Guest

      USPS is government, UPS and FedEx are not.

  • Alex

    I had a choice of ordering from Michigan or Indiana. The Michigan seller charged sales tax on the postage. So I ordered from the Indiana seller, and I’d do the same thing again!

    • Lainey Lou

      I thought it was based on where the buyer is located. If that is the case, it should have been the same regardless which one you bought it from.

  • McFly

    What if I only charge a dollar for shipping on all items? Kinda like with $2.95 shipping on all orders. What about additional item shipping promotions? Many sellers offer discounted combined shipping. Are we taxed on actual cost or declared amount charged to or “paid by” the buyer?

  • TaxJar

    You charge sales tax on the actual amount the buyer pays. (Keep in mind that you aren’t actually taxed. You are charging sales tax to the buyer.) I hope this helps!

  • Greg

    Mark. Thanks for the article! I’ve received some mixed guidance related to sales tax on shipping charges in Colorado. You have Colorado on the “non-taxable” list, but that’s only if the shipping is separately listed on an invoice *and* the charge is separable from the rest of the sales transaction. In my case, my customers order photo prints that are fulfilled through my vendor and shipped directly to them via common carrier. The shipping costs are separately listed on the invoice, but based on my understanding of the definition of “separable”, I don’t believe such shipping costs are separable, in which case shipping is subject to sales tax. Any clarifying thoughts or insights you can share to help?

  • TaxJar

    Hi Greg,

    This sounds like one of those many small nitpicky discrepancies that makes sales tax so confusing for merchants. I don’t want to try to interpret the law and potentially mislead, so I’d recommend consulting with either the Colorado Dept of Revenue or a sales tax good accountant on this one. George Sleeman, one of our preferred sales tax EA’s, is actually in Colorado. Here’s his info:

  • cjb

    I think it’s crap that Kohl’s charges tax on shipping, even to Indiana, which is listed as a state that does not do this.

  • TaxJar

    Hi Richard, Yes, I definitely believe that’s true. The sales tax on shipping law in Indiana changed without much fanfare and I’m betting a lot of sellers have the old info. If I were you and ran into this, I may just let the retailer know.

    • Richard Bushard

      I did contact the retailer and I was told they can only go off what the state treasury office sends them and that I would have to contact them and have them send the new information. It turns out it’s the Department of Revenue that handles sales tax and I sent them an email requesting the updated sales tax be sent to the retailer, so we’ll see what happens.

  • VinVonn

    One service we provide our customers with is the ability to print shipping labels so they can send their products to consumers around the US.

    We’ve arranged for competitive pricing on shipping costs, and include a slight mark up for our purposes. Our customers have the option of passing the shipping costs on to their consumers, or marking up/down the shipping costs.

    We have not been charging sales and use tax on the shipping labels, since we consider this to be different than the ‘shipping, handling’ charges normally included. Any insight would be helpful.

    • TaxJar

      Hi VinVonn, I recommend going straight to a sales tax pro on this one. This is extremely specific and we can only provide general guidance. Here’s a list of sales tax pros we trust here at TaxJar:

  • damiankaelgreen

    Very helpful post, Thank you!

  • James Sutton CPA Esq

    FYI – the article is off for Florida. If the shipping is optional to the customer or risk of loss passes to the customer at the point of shipping, then it is not subject to sales tax.

  • TaxJar

    Hi James,

    Thanks for the info! Can you point out the code or ruling so we can amend it? Thank you!

  • TaxJar

    Thank you! That’s so helpful!

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  • John Unknown

    As far as I’m concerned, for a business to charge sales tax on shipping is bad customer service. I order a lot of merchandise, especially clothing, from JCPenny. I could get my order shipped to the local store for free, until they recently closed. When I went to place an order today, not only do I have to pay $8.95 shipping now, they were going to charge me sales tax on that shipping charge. I say “were” going to, because I cancelled my order. I don’t mind paying the shipping, but when they charge tax on the shipping, that’s when I take my business elsewhere.

    • TaxJar

      Unfortunately sales tax on shipping is due to the individual state’s sales tax rules rather than the vendor’s choice.

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  • Benito Ingognito

    Taxes on shipping just isn’t fair!

  • Mike Aikins

    We ship to all states yet we don’t warehouse any items. We drop ship all items to our customers. Would we only collect tax for customers in our state or in all states? If the supplier we are buying from has nexus in the state items are being shipped to would we need to collect then pay sales tax to that supplier? Also we provide a quoting service we charge for would the quotes (paperwork providing a value of said items) be taxable?

  • Monica

    Greetings….my question to you is, since I am conducting business in North Carolina, but have my products stored in a warehouse in New Jersey, and ready to be shipped out from New Jersey, would I need to charge tax on the shipping? Or just tax on shipping for North Carolina customers. Thank you in advance.

    • TaxJar

      Hi Monica,

      You’d need to charge sales tax to buyers in states where you have nexus, no matter from where they ship. So if you’re storing something in NJ, but have nexus in NC, then you’d charge a customer in NC the NC sales tax rate on the purchase + shipping cost. I hope this helps!

      • Monica

        Thank you so much Mike for the prompt reply….just want to make sure I comply with North Carolina’s tax rules and shipping.

  • Monica

    Greetings….my question to you is, since I am conducting business in North Carolina, but have my products stored in a warehouse in New Jersey, and ready to be shipped out from New Jersey, would I need to charge tax on the shipping? Or just tax on shipping for North Carolina customers. Thank you in advance.

  • Monica

    Another question, Mike….If customers outside of North Carolina, purchase products, no sales taxe charged for them, is this correct?

  • DW

    Hi Mark! I am creating my website now on Shopify and I wanted to know how would you charge the tax on the shipping as well as the item? Would there be separate lines each at the applicable tax rate (for Illinois)? Thanks!

    • TaxJar

      Hi DW,

      Some states require you to include a separate line item for shipping in order to separate the shipping from the item price. We recommend making that a practice. I hope that helps!

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