Understanding Freight Taxation
Freight can be taxable or non-taxable depending upon the goods and services being delivered. Charges for shipping and delivery are also considered under this category.
Exemption Certificate Definition
An exemption certificate is an official document granting special permission not to pay or do something, such as a medical or tax exemption certificate.
Specific State Guidelines
Colorado
- Delivery and freight charges for taxable sales are generally not subject to sales tax if separately stated on the customer invoice and separable from the purchase.
California
- California generally exempts from sales tax delivery, freight, and transportation charges if separately stated and not provided by the retailer.
Florida
- Transportation charges for taxable sales in Florida are generally taxable, whether separately stated or included in the sale price.
Calculating Tax on Merchandise
To calculate tax on merchandise, multiply the item or service cost by the sales tax rate in decimal form to obtain the total sales tax. Add this to the item cost for the total cost.
Freight Expense
Freight expense refers to the charge imposed by a carrier for transporting goods from the source to the destination location.
Taxability by State
- Utah: Sales tax may apply to charges for shipping, handling, delivery, freight, and postage.
- Oklahoma: Shipping and handling are generally non-taxable. If your business taxes shipping, adjust settings for accuracy using TaxJar’s Shipping & Handling Override.
Tips for Non-Taxable Freight
- Show freight charges separately on invoices.
- Ship via common carrier rather than using your own truck.
- Use clear language on invoices for shipping charges to avoid confusion.
- Ensure shipping is optional for customers to avoid taxation.