Are Delivery Charges Taxable?

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When calculating the total price of a purchase, the consumer should consider all expenses, not just the initial price of the item. Possible additional costs include sales tax and delivery fees, and in some instances, there might be more taxes on the delivery fee.

State Regulations

States typically generate revenue by sales, property and income taxes. Not all states use all these forms of taxation to generate revenue. Some states opt to use one form of taxation instead of another, while other states use two or three methods to generate income. A few states, such as Alaska and New Hampshire, don’t charge sales tax. Each state has its own tax code. While one state might charge sales tax on a delivery, another might not. To determine any taxes due, refer to the tax code of the state in which you purchase the item and the state in which you have the item delivered.

Making the Delivery

In some states, such as California, when the retailer delivers the item, that delivery fee is typically subject to sales tax. Yet, if the retailer uses an independent carrier to deliver the item, it is not. For example, if Acme Mattress Company delivers a mattress using an Acme Mattress delivery truck, they normally charge sales tax on the delivery fee. Yet, if they use an independent delivery company to deliver the mattress, they normally wouldn’t charge a tax on the delivery fee. In some states, if the retailer charges more for a delivery than what an independent delivery service would, the difference is subject to taxation.

Making the Delivery

Even in states, like California, where the retailer has to charge sales tax on a delivery fee, it is possible to get around that tax when using the retailer's vehicles. One way, in some states, is for the buyer and seller to have a written contract stating that the buyer gains legal ownership of the merchandise prior to delivery, as opposed to taking ownership upon delivery.

Billing for Delivery

How the retailer bills the delivery sometimes affects the taxable nature of the delivery fee. For example, if the delivery is included with the purchase price and not charged as a separate fee, it might be subject to the same sales tax rate as the initial item price, according to the state’s tax codes.

References

About the Author

Ann Johnson has been a freelance writer since 1995. She previously served as the editor of a community magazine in Southern California and was also an active real-estate agent, specializing in commercial and residential properties. She has a Bachelor of Arts in communications from California State University, Fullerton.

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