California is known for its strict regulations regarding shipping charges. Whether or not sales tax needs to be collected on shipping depends entirely on how these charges are presented on the invoice and what elements are included in the fee.
General Rule
Exempt: Shipping is not taxable if it’s separately stated and represents only the actual cost of delivery to the customer.
Taxable: If the shipping charge includes handling or other non-delivery costs, the entire amount becomes taxable.
Included in product price: If shipping is bundled into the item price (not broken out), it’s taxable along with the sale.
Handling Charges
It is important to note that handling fees are always taxable in California. If a combined "shipping & handling" fee is listed, the full charge is subject to tax, even if a portion of that fee covers delivery expenses.
Best Practices for Compliance
Break out shipping separately from handling.
State shipping as “Delivery” on invoices and ensure it matches the actual cost.
Avoid lumping costs together, since this makes the entire charge taxable.
Example
You sell a taxable item for $200 and charge $20 for shipping (separately stated as “Delivery”) → the $20 shipping is exempt.
You sell a taxable item for $200 and charge $20 for “Shipping & Handling” → the $20 fee is taxable.
Stay Compliant with Kintsugi
California’s rules can trip up businesses that don’t separate delivery from handling. Kintsugi Intelligence makes sure your invoices and tax calculations follow state guidelines so you never risk overcharging or under-collecting tax.
Important Notice: Sales tax regulations are subject to change without prior notice. For guidance tailored to your business, please consult a qualified tax advisor.