Are you paying sales tax on online shipping fees? Should you?
Can聽a retailer charge sales tax on shipping fees?聽
It turns out that the answer to that question is a bit more聽complicated than you might think.聽Before we dive into the lists, there are a few things to keep in mind.
First, and what most online shoppers聽already know, is that聽sales tax eligibility usually聽starts with the聽buyer's location. This is why big retailers like聽聽can collect sales tax in one state but not in another. Conversely,聽聽must follow the聽sales tax laws聽for every state聽they ship to because they have brick and mortar聽locations in every state.
But that doesn't mean that a seller is obligated to collect sales tax for your state.聽And that usually聽depends on whether or not you live in a聽state where the retailer also has a physical presence. That presence doesn't have to be a storefront. It can be something as mundane as a warehouse. Technically, you as a consumer and taxpayer are supposed to report untaxed online聽purchases聽on your income taxes every year, but聽the vast majority of taxpayers聽do not and the IRS doesn't enforce it. However...
Sales tax nexus laws are complicated and constantly evolving.聽The days of tax-free shopping online are numbered as state sales tax laws are slowly catching up to the internet revolution.聽States know they're losing a fortune in tax revenue to online sales, and they're scrambling to plug the holes. Well, as much as molasses-slow government bodies can scramble, anyway.
So how does Brad's Deals handle sales tax?聽When our team of聽聽posts a deal, we always make a point of calling聽out any聽shipping charges, and we tell you if sales tax is likely to be charged on your purchase. However, we don't talk about specific tax rates, including whether聽or not your state will charge you sales tax specifically on聽shipping, because they vary wildly from one state, county and city to the next, not to mention different tax rates for different products, and the alacrity with which they can change.
Our best advice here is to be a savvy online shopper:
- Look for聽.
- Group purchases together to get over free shipping spending thresholds.
- Opt for in-store pickup to avoid shipping charges altogether when you can.
- Know your local tax rates.
- Lastly, check our list below to see if shipping is included in the calculation when you shop online.
States Where Shipping is Taxable:
- Arkansas
- Connecticut
- District of Columbia
- Georgia
- Hawaii
- Kansas
- Kentucky
- Michigan
- Minnesota
- Mississippi
- Nebraska
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Pennsylvania
- South Carolina
- South Dakota
- Tennessee
- Texas
- Vermont
- Washington
- West Virginia
- Wisconsin
- Wyoming
States Where Shipping is Not Taxable if Separately Stated:
What does "separately stated" mean exactly? The short answer is that if shipping is listed as a separate item on your bill, then it聽cannot be taxed. Well, mostly. There are exceptions here, too, of course, because sales tax nexus laws are聽tricky.
- Alabama
- Arizona
- California
- Colorado
- Idaho
- Indiana
- Iowa
- Louisiana
- Maine
- Massachusetts
- Missouri
- Oklahoma
- Rhode Island
- Utah
It's Complicated:
Florida
Shipping can't be taxed if聽it's listed separately聽on a bill or invoice, or if the charge can be avoided by a decision or action made by the purchaser. This means聽that online聽purchases eligible for in-store pickup聽should be exempt from sales tax collected on shipping since you can avoid shipping altogether this way.
Illinois
Talk about complicated... the taxability of shipping in Illinois聽depends heavily on factors that you, as a consumer, are unlikely to be privy to. For example, if a retailer charges a flat $7.99 shipping fee, but their actual shipping costs for your order are less than that, say $5.50, then the shipping fee is taxable. Which, let's face it is a pretty raw deal for聽us as consumers since not only are you聽being charged more聽than the actual cost of shipping, you're getting聽hit with a tax on that overcharge on top of it.
What's more, just because shipping is a separate line item on your invoice doesn't mean it's not an inseparable part of the item's cost. If shipping it to you is the聽only聽way for you to get it, then Illinois figures the shipping cost is part of the selling price, no matter how the invoice breaks it down.
Finally, there is some thought that sellers may not have to charge sales tax if they offer an in-store pickup option, but it's really not at all clear. Let's just say "maybe, or maybe not" for now, since Illinois still has a long way to go to clear things up.
Maryland
Shipping is not taxable if listed separately, but handling聽is聽taxable. So when you have a combined shipping and handling charge, shipping becomes taxable.
Nevada
Like Maryland, shipping fees are聽not taxable if handling is listed separately, but聽is聽taxable if they're combined.
Virginia
In general, shipping is not taxable if listed separately from the price of the item. However, if you combine it with a handling fee, it becomes taxable. Many Virginia retailers get around the tax by listing shipping and handling as separate line items.
Yes, that only covers聽45聽states, so here are the other 5:
Montana,聽New Hampshire,聽Delaware, Oregon and聽Alaska aren't listed anywhere聽above because聽the lucky residents of these five聽states never have to contend with state sales tax anyway - so whether sales tax can be charged on shipping fees is a moot point, which keeps things refreshingly聽simple for retailers.
This article first appeared in
