CA Sales Tax 101 Shipping States

Is Shipping in California Taxable?

by Mark Faggiano

Shipping Taxability California

Your eCommerce business is doing well and you’re making sales. One problem you’re encountering is figuring out whether or not you should charge sales tax on shipping charges. Each state has different rules and regulations when it comes to charging sales tax on shipping, and some of them make your life more difficult than others. One such state is California.

Note to TaxJar users: After consulting with our accounting advisors we have opted to treat California shipping as non-taxable. If your business requires you to treat shipping differently we are working on a feature that will allow you to change your shipping taxability in a state. Stay tuned!

Sales Tax on Shipping in California? It Depends On Quite a Bit

While the sales tax on shipping costs is very complicated in California, they at least have provided a helpful table on their Board of Equalization website:
Sales tax on shipping California
Here’s the breakdown. First, if the sale is otherwise not taxable, any related charges, including shipping, are not taxable.

If the sale IS taxable, then shipping may be nontaxable, partially taxable, or fully taxable.

Non-Taxable: To achieve this, you must meet three criteria. First, you must ship directly to the purchaser by common carrier, contract carrier, or US mail. Second, your invoice clearly lists shipping, handling, delivery, etc. charges separately. Lastly, the charge is not greater than your actual cost for delivery to customer.

Partially Taxable: If you meet all the criteria EXCEPT the last, your shipping cost may be partially taxable. The portion of the delivery charge that is greater than the actual delivery cost is the part that is taxable.

Ex: You charge a $3.99 flat rate to your customers to ship all of your products, but the USPS only charges you $3.03 to ship a particular item. The $0.96 that you charged your customer over and above the actual price you paid to ship the item will be taxable.

Another time this could happen is if you combine the shipping & handling costs – the handling will be taxable, though shipping might not be.

Fully Taxable: There are several ways you can find yourself fully taxed for shipping in California:

–        You don’t keep adequate records and can’t prove actual shipping cost.

–        You deliver merchandise with your own vehicle

–        You make a separate charge for fuel or handling.

–        You include a delivery charge in the unit price (i.e. the delivery charge is not separately stated).

–        You include the “freight-in” cost, or cost of shipping merchandise to your business.

If you hit any of these points, you most likely will have to collect sales tax on shipping.

Summary of Sales Tax on Shipping in California

In summary, California is extremely complicated when it comes to shipping and sales tax. Your best bet is to hit the three criteria for not being taxed: ship directly to the purchaser, clearly list your shipping cost separately, and don’t overcharge for shipping. Anything else and you’re going to get hit with at least a partial tax on shipping, if not a tax on the full price of shipping.

Have questions or comments about taxable shipping in California? Leave a comment below and start the discussion!

  • S

    Macy’s says they charge tax on delivering furniture because it’s a “service”. Amazon will come in and set up your TV, and does not charge sales tax. Sleep train will set up your bed and take away the old one, and not charge tax on delivery. What’s the deal with Macy’s?

  • I don’t know for certain about these individual companies, but it may be a sales tax nexus issue. If they don’t have sales tax nexus in California, then they aren’t required to collect sales tax from buyers in that state. It’s also possible that some companies just aren’t complying with the law or are complying when they don’t have to. Sales tax can be so complicated that even big companies with lots of accountants and sales tax help get it wrong from time to time.

  • Janisen

    wells fargo just charged me tax on shipping my free order of checks! How’s that?

    • They must have sales tax nexus in your state. Some states require sales tax on shipping charges no matter the price of the item.

  • mgreen

    Does each individual sale have to comply with the rule of not charging over cost? Or in this example: As drop shipper we pay vendor/wholesaler $5.00 to ship order. We charge $6.00. However another order we may charge $4.00 but we also paid $5.00. So we charged what we paid on the average of the two orders. What does CA look at?

  • That one is tricky, so I’d consult an accountant or the California BOE to get a ruling.

    Here’s a list of sales tax accountants we trust:

    http://www.taxjar.com/sales-tax-accountant-directory/

    And you can contact the BOE here:

    http://www.boe.ca.gov/info/contact.htm

  • Robert Maybeth

    Dont do business there unless yo u are selling penny blossoms. They tax and regulate everything as they are hell bent on driving the state into the ground. Do your b uisness elsewhere.

  • WakeForestFan

    Should Shipping and handling be checked (Yes, if Item is Taxable)?

  • At TaxJar, from our interpretation, we consider that there’s no sales tax on shipping in California and check no on that box. But like I always say, you should make the business decision that you’ve decided is right for your business.

  • Martin

    Should shipping and handling be checked if I use Amazon FBA in CA? I have no idea if they charge the perfect amount for shipping. But I know I get charged the full amount they say.

    • Hi Martin,

      After consulting with a sales tax expert, TaxJar doesn’t consider shipping taxable in California for FBA purposes. You can see our settings for each state in this guide: http://www.fbasalestax.com I hope this helps!

    • Hi Martin,

      After consulting with a sales tax expert, TaxJar doesn’t consider shipping taxable in California for FBA purposes. You can see our settings for each state in this guide: http://www.fbasalestax.com I hope this helps!

  • Martin

    Should shipping and handling be checked if I use Amazon FBA in CA? I have no idea if they charge the perfect amount for shipping. But I know I get charged the full amount they say.

  • Gabi

    Hello, I am charged sales tax on a shipment from Orange County to LA County at a rate of 8% for Orange County AND 9% for LA County, California. Total of 17%. Is this right?

    • Hi Gabi,

      No, that isn’t correct. You should only be charged sales tax at the rate of the point of sale. I hope this helps!

      • King James 1611

        can a person charge you a sales tax if one they just started out and are less than 4 mill in sales with only 10 sales on ebay same state California but no resale license? I thought you can only collect tax if you are a licensed business or licensed wholesaler/ reseller? otherwise how would you even give that to the gov without a license?

        • Hi there,

          By the letter of the law, any seller – no matter how small – who has sales tax nexus in a state needs to apply for a sales tax license and charge sales tax to buyers in that state. The only exception is Tennessee, who doesn’t require sellers who gross less than $400/month to have a sales tax license. You can find out a whole lot more about sales tax in our sales tax 101 guide: http://www.taxjar.com/guides/intro-to-sales-tax/

          • King James 1611

            thank you

  • Amanda

    I have just opened an Etsy shop and I currently live in California. I would like to know if I am supposed to charge sales tax to the buyer based off the state they are in, or do I just charge buyers from California?

  • King James 1611

    but being hit with taxed shipping as a seller is that charged to me or my customer?

    • If you’re the seller and you’re collecting sales tax from a buyer in a state that has taxable shipping, it’s your requirement to collect the sales tax from your buyer and remit it to the state along with your sales tax filing. I hope that helps!

  • King James 1611

    I’m not sure if you realize but I’m reading amazon and ebay will auto charge tax on shipping and handling? especially in California to california sales but every where else it says no they are not supposed to idkwt think and BOE says they are not supposed to

    • Hi there,

      Amazon allows you to set whether or not you would like to charge sales tax on shipping. We have a guide to setting up Amazon sales tax here: http://www.fbasalestax.com

      I’d have to research whether or not eBay automatically applies sales tax to shipping charges. Unfortunately, their sales tax collection engine is not as robust or detailed as Amazon’s.

  • Brett

    Do you know if selling of prepackaged food in california is taxable?

    on another note I am charging a convenience fee for delivery of the goods, how do i calculate the tax on that?

  • BB

    Hi there, wondering about the shipping and handling tax as a seller. On eBay I put a tax table option for just CA sales for state tax etc. Though, I noticed when purchasing an item (Shipping supplies) I was charged tax , even though they were outer states, which i think was shipping tax and made me wonder, if i should charge shipping tax also to every state? I tend to add the shipping price combined with the price of the item listed, e.g. music cd 10$ with free shipping. Will they try to collect additional tax on top of the 9.25 % of the sale for shipping and handling? Sorry about the length of the question and/or any confusion, since i am a firstie. And thank you for the articles!

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