Is Shipping Taxable?

If you’re a seller or just need to ship a package across state lines, you may be wondering whether shipping is taxable or not.

When you make a purchase, do you expect to pay taxes on it? For most items, the answer is likely yes. But what about shipping? Is that taxable, too? A lot of business owners find it difficult to figure out whether shipping is taxable. The answer to this question can be a little murky but don’t worry as we’re here to help clear things up for you.

Is Shipping Taxable? Shipping is typically taxable if you’re shipping a physical product that is taxable. This includes items like clothing accessories or equipment, books, and furniture. Shipping digital products are never taxable.

If you’re shipping to a state where you have nexus, then you must charge sales tax on shipping. Nexus is a physical or economic presence in a state. This could be having an office, warehouse, or employees in the state. It could also be shipping into the state frequently enough that the state says you have nexus.

Some people don’t think about the tax implications of shipping. But, depending on what you’re shipping and where it’s going, you may have to pay taxes on your shipment.

In this article, we’re going to discuss when shipping is taxable and how to pay any applicable taxes.

So, let’s get started!

It depends on the product being shipped and the state in which it is shipped. Generally, most products that are shipped within the U.S. are subject to sales tax, but there are some exceptions. For example, digital products (such as e-books) typically do not incur sales tax, while tangible products (such as clothing) often do.

If you’re shipping a physical product that is taxable, then shipping charges are also taxable. This includes items like clothing accessories or equipment, books, and furniture. Shipping digital products are never taxable.

If you have nexus in a state and are shipping taxable items to someone in that state, you must charge them sales tax on shipping. You would also need to collect and remit the tax to the state.

However, if you’re shipping to a state where you don’t have nexus, then you don’t have to charge sales tax on shipping. This is because you don’t have a physical or economic presence in the state, so the state can’t tax you.

However, if the customer is in a state where they have to pay use tax, they may still have to pay taxes on their purchase. Use tax is a tax that is owed when you purchase an item without paying sales tax. The customer would be responsible for remitting this tax to the state, not the seller.

It’s important to note that each state has its own rules and regulations when it comes to sales tax, so it’s best to check with your state’s Department of Revenue for more information.

Calculating Taxes On Shipping

Now that we know when shipping is taxable, let’s discuss how to calculate taxes on shipping. If you’re shipping within the U.S., you’ll need to use the following formula:

(Shipping Charge + Cost of Items) x Sales Tax Rate = Total Tax Due

For example, let’s say you’re shipping a taxable item to a customer in a state with a 6% sales tax rate. The shipping charge is $10 and the cost of the item is $100. Using the formula above, we would calculate the taxes as follows:

($10 + $100) x 0.06 = $12

This means that the total amount of tax due would be $12. The customer would then be responsible for paying this amount to the state.

It’s important to note that you should only charge taxes on the shipping if the product being shipped is taxable. For example, if you’re shipping a digital product (such as an e-book), then you would not need to charge taxes on shipping.

How To File Shipping On Your Federal Tax Return

Schedule C of the IRS tax form 1040 is used to report income from a business. If you’re a business owner, you’ll need to include the cost of shipping in your gross receipts when you file your federal tax return. Your gross receipts are the total amount of money that your business takes in from sales, minus any refunds or discounts.

If you’re an individual who pays for shipping, you can’t deduct the cost of shipping on your federal tax return. However, you may be able to deduct the cost of shipping if you’re self-employed and paying for shipping as a business expense.

To deduct business expenses, you’ll need to itemize your deductions on Schedule C of your federal tax return. Form 1040 includes Schedule C. On this form, sole proprietors tell the IRS how much they made or lost during the past year.

State Taxes On Shipping

Shipping taxes vary from state to state. Some states exempt shipping charges from sales tax, while others treat shipping as a separate transaction and charge sales tax on the shipping cost.

Some states also offer discounts on shipping charges for certain items, such as clothing or books. And some states exempt specific items from sales tax entirely, regardless of whether they’re shipped or not.

It’s important to check with your state’s Department of Revenue for specific rules and regulations regarding sales tax on shipping.

States Where Shipping Is Taxable

If you charge for shipping as part of an order, then it is taxable in the following states. It doesn’t matter if the shipping charge is included in the product price or separate from the product price.

Arkansas
Connecticut
District of Columbia

Georgia
Hawaii
Illinois

Indiana
Kansas
Kentucky

Michigan
Minnesota
Mississippi

Nebraska
New Jersey
New Mexico

New York
North Carolina
North Dakota

Ohio
Pennsylvania
Rhode Island

South Carolina
South Dakota
Tennessee

Texas
Vermont
Washington

West Virginia
Wisconsin

States Where Shipping is Not Taxable if Separately Stated

In some states, shipping charges are not taxable if the charge is shown separately from the selling price. If you include the charge as part of the price of the item, they’re taxable.

Alabama
Arizona
California

Colorado
Florida (If shipping meets certain criteria, it may be taxable in Florida. For more information, see Is shipping taxable in Florida.)
Idaho

Iowa
Louisiana
Maine

Maryland (If shipping and handling are combined, shipping is taxable just like in Virginia)
Massachusetts
Missouri (This changed on August 28, 2017)

Nevada
Oklahoma
Utah

Virginia (If shipping and handling charges are combined, that charge is taxable, even if it is stated separately.)
Wyoming

Some states may require you to pay taxes on shipping, even if you don’t have nexus in the state. For example, Colorado requires out-of-state sellers to collect and remit sales tax on shipping if they exceed certain thresholds. The thresholds are either $100,000 in gross sales or 200 transactions per year in the state.

If you exceed either of these thresholds, you would need to collect and remit sales tax on shipping to Colorado customers. You would also need to file regular sales tax returns with the state.

It is always best to check your state’s Department of Revenue for the most up-to-date information about sales tax since each state has its own rules and regulations. You can find contact information for your state’s Department of Revenue on their website.

Conclusion

Now that you know whether shipping is taxable, you can properly calculate and collect any taxes that may be due. Whether or not shipping is taxable depends on the laws of the state that the shipment is being sent to.

The best way to determine whether or not you need to charge taxes on shipping is to check with the laws of the state that you’re shipping to. This will help you stay compliant with state tax laws and avoid any penalties or interest charges.

If you do need to charge taxes on shipping, then you can usually pay those taxes by including the appropriate amount of money with your shipment or by paying them online through the website of the state’s department of revenue.