Sales Tax 101 Shipping TaxJar

New Feature: Shipping & Handling Taxability Override

by Jennifer Dunn

Freight Taxability Override TaxJar Feature

TaxJar recently added a Shipping & Handling Override. This is a way for customers with unusual shipping and handling taxability situations to make TaxJar even more accurate. 

But first… 

Why offer a Shipping & Handling Override?

Each state makes their own sales tax rules and laws and one factor that varies from state to state is whether or not shipping and handling charges are taxable.

In many states, shipping charges are not taxable if they are stated separately on the invoice. 

In other states, shipping is considered to be a necessary part of the transaction and therefore shipping charges are generally considered taxable. 

To make matters more confusing, nearly every state has some kind of exception to the rule, which we detail in our state-by-state guide to “Is Shipping Taxable?” 

For example, in California, charges for freight (another term sometimes used for shipping and handling) is generally exempt from sales tax. But major exceptions include: 

  • Freight is taxable in California if charges for shipping and handling are combined into one line item on the invoice (I.e. the invoice shows a “Shipping & Handling” charge or a  “Postage and Handling” charge.)
  • Freight is taxable in California if the seller does not maintain records that show the actual cost of the delivery

For this reason, some eCommerce businesses might be required to, or choose to, charge sales tax on shipping charges in a state like California where shipping is generally non-taxable.

TaxJar’s New Shipping & Handling Override 

TaxJar’s new Shipping & Handling Override allows TaxJar customers to toggle how they want to handle shipping taxability in the TaxJar app in states where shipping is generally considered non-taxable.

While we set states like California to “non-taxable” as the default shipping taxability scenario, if you charge sales tax on freight in California or other states by simply:

  1. Logging in to TaxJar
  2. Visiting the State Settings page for the state in question
  3. Changing the Shipping & Handling Taxability field to “Fully Taxed”

TaxJar Feature Freight Override

This feature allows TaxJar customers to customize TaxJar to their specific business shipping taxability use case. 

TaxJar API users can use this feature to collect sales tax on shipping in states were shipping isn’t normally taxable. 

Further, even non-API users will see that their “Expected Sales Tax Due” report is now even more accurate. 

Important note: TaxJar users can only change the default taxability settings in states where shipping is generally tax exempt. In order to prevent unintended errors, we don’t currently offer the option for businesses to default to not collecting tax in a state where shipping is generally taxable.

For more on shipping taxability in every US State, check out our Sales Tax by State: Is Shipping Taxable? article.

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