How to Handle Sales Tax on Shipping in Multiple States

Sales Tax

You know how important online sales are to your business right now, given how the Covid pandemic has fueled dramatic growth in shopping-from-home, but do you know how to calculate taxes on your company’s delivery charges?

We at Avalara partner with Strategies Group to provide sales and use tax compliance solutions for your Acumatica platforms. And as we have noted in the past, there’s no one way to get products into the hands of customers – and there’s no one way for states to tax delivery charges.

Here are some general guidelines for the various state laws governing sales taxes on shipping. Please note that these are guidelines and not tax advice. You should confirm the information with the departments of revenue in the relevant states, or with a trusted tax advisor.

In general, laws on what is taxed vary both by state and by delivery method. The tax on a package a company delivers in its own vehicle often is different than the tax on an identical package delivered by a common carrier or private carrier.

Alabama, for example, considers deliveries by a company vehicle or private carrier taxable, but deliveries by U.S. Mail or common carrier are not.

Different states also can have different laws for products that are delivered electronically and products that are tangible personal property. New York, for example, generally exempts products delivered electronically, but generally taxes shipping, handling, and delivery charges on sales of taxable physical goods.

And in some states, whether a delivery charge is taxed can depend on how it’s invoiced: a combined charge for shipping and handling may be taxed differently from shipping and handling charges that are listed separately.

Take Wyoming, where shipping and handling charges are generally exempt when they are separately stated and distinguishable from any taxable charge that may appear on an invoice. But if shipping and handling are lumped into the sales price for a taxable purchase, then those charges are generally taxable.

We’ve compiled a general guide to sales tax on delivery charges in all 50 states and the District of Columbia. You can read that here.

Consumers want shipping to be cheap, fast, and reliable. They also don’t want to pay more sales tax than they actually owe. Automating sales tax collection, remittance and filing is the most-effective way to get it right.

To learn about how well Avalara’s sales tax compliance solutions work with your Acumatica platform, contact your Strategies Group representative.


Written by Gail Cole, Avalara Senior Writer