Understanding how shipping and handling charges are taxed in the U.S. can be complex, as regulations vary significantly across states. This guide provides clarity on state-specific rules, empowering you to maintain compliance with confidence. Making errors in sales tax collection can lead to audits, penalties, and damaged customer relationships. Automated solutions, like Kintsugi AI, can simplify this process, ensure accuracy, and streamline reporting.

This guide focuses on common scenarios for ecommerce sellers, assuming you are delivering taxable items to customers within your state via a common carrier (like USPS, FedEx, or UPS), rather than using your own vehicle. For more specific or complex situations, we recommend consulting a tax advisor.

In these states, shipping and handling charges are typically subject to sales tax if the product being sold is taxable. This often applies even if the shipping charge is listed separately on the invoice.

Arkansas: Shipping charges are generally taxable as part of the gross receipts from the sale. Exceptions include shipping non-taxable items or if a third-party carrier directly bills the buyer. For mixed shipments of taxable and non-taxable items, sales tax should be charged on the portion of shipping attributed to the taxable items, based on either purchase price or weight.

Connecticut: Shipping charges are taxable if the items being shipped are taxable. If the items are non-taxable, such as food items, then shipping is not taxable.

District of Columbia: If your business has nexus in Washington D.C., and you ship goods there, shipping charges are taxable.

Georgia: Charges for shipping, delivery, or freight are considered part of the sale price and are taxable, even when separately stated on the invoice. If the product itself is not taxable, shipping is also not taxable. For mixed shipments, you can either tax the entire shipping fee or just the percentage that applies to taxable items, determined by weight or price.

Hawaii: Hawaii implements a "general excise tax" (GET) instead of a sales tax, which businesses typically pass on to consumers. Hawaii is unique as it always taxes shipping charges, regardless of whether they are separately stated or if the item is taxable, when shipping within the state.

Indiana: Prior to July 1, 2013, most shipping charges were taxable. Now, separately stated shipping charges are not taxable under certain conditions, specifically if delivered via the USPS. However, if a private carrier (e.g., FedEx, UPS) or self-delivery is used, or if charges are not separately stated, shipping is taxable.

Kentucky: Shipping charges are generally taxable if the seller makes the delivery. Handling charges are always taxable. If shipping and handling are combined into a single charge on an invoice, the entire amount is taxable, regardless of the delivery method.

Louisiana: Effective January 1, 2025, Louisiana generally taxes shipping as part of the sales price of a transaction, even if separately stated. If the shipped item is an exempt or non-taxable product or service, then shipping is not taxable.

Minnesota: If a taxable item is shipped, the shipping and handling charges are taxable, even if separately stated on the invoice. Exceptions include shipping non-taxable items (like groceries) or if a third-party carrier directly charges for and furnishes the delivery service.

Mississippi: Sales tax applies to the entire price of an item, including shipping, handling, and delivery charges, even if these are separately stated. Shipping is not taxable if the item being shipped is non-taxable.

Nebraska: If you are shipping a taxable item, the shipping charges are also taxable. Exceptions include shipping non-taxable items or using the US Postal System for direct mail.

New Jersey: Since October 1, 2005, most shipping transactions are taxable. If the goods being delivered are taxable, the shipping is also considered taxable. For mixed shipments of taxable and non-taxable items, tax applies only to the portion of the delivery charge covering the taxable item, based on either total sales price or total weight. If not allocated, the entire charge is taxable.

New Mexico: New Mexico levies a gross receipts tax (GRT) on businesses, which is typically passed on to buyers. If the seller pays the delivery charges to a carrier, shipping is considered a taxable part of that transaction, and the seller should charge the buyer GRT on that shipping charge or remit it themselves.

New York: If the items being shipped are taxable, the shipping and handling charges are taxable. If a shipment includes both taxable and non-taxable items with a single shipping charge, that charge is taxable. However, if there are two separate, fairly allocated shipping charges for taxable and non-taxable items, the charge for the non-taxable items is not taxable. Shipping is also not taxable if the customer directly contracts with a common carrier for delivery.

North Carolina: Shipping charges on the sale of taxable tangible personal property are taxable, regardless of whether they are separately stated on the invoice. If the item is not taxable, shipping is also not taxable. For mixed shipments, you can apportion the shipping tax based on the selling price or weight of the taxable items.

North Dakota: If the item you are selling is taxable, then freight, delivery, or other transportation charges are also considered a taxable part of the selling price. If the item is not taxable, shipping charges are not taxed. For mixed shipments, sales tax should be calculated on the portion of shipping related to the taxable items.

Ohio: Ohio considers shipping charges part of the price of the item and therefore taxable if the item itself is taxable. If the item is non-taxable, shipping is not taxed. For mixed shipments, only the portion of shipping charges allocated to the taxable item is subject to sales tax.

Pennsylvania: Pennsylvania's rules are straightforward: if all items being shipped are taxable, shipping is taxable; if all items are non-taxable, shipping is not taxable. However, if a shipment contains both taxable and non-taxable items, the shipping charges for the entire shipment are taxable.

Rhode Island: Rhode Island considers shipping charges part of the sale price. Therefore, if the item is taxable, shipping is also taxable. If the item is not taxable, shipping charges are not taxed.

South Carolina: Most online sellers should charge sales tax on shipping charges to customers in South Carolina if the seller pays to ship the item. However, if the buyer arranges their own shipping method, the seller does not charge sales tax on shipping.

South Dakota: Delivery charges on taxable items are taxable. If the items are tax-exempt, shipping charges are not taxed. For mixed shipments, calculate the percentage of shipping charges that apply to the taxable items and charge sales tax on that portion.

Tennessee: Shipping and handling are taxable in Tennessee as long as the product being delivered is also subject to sales tax. If a shipment contains both taxable and non-taxable products, the seller must charge sales tax based on the percentage of goods that are taxable, using either sale price or weight. The only exception is if a package contains only non-taxable items.

Texas: Shipping charges and handling fees are generally considered taxable when associated with the sale of taxable goods. If shipping and handling are combined as a single charge on an invoice, the entire amount is subject to sales tax. Shipping fees may be exempt if the customer has the option to pick up the item or arrange their own shipping method, or if the customer provides a properly completed Resale Certificate or an Exemption Certificate.

Vermont: Delivery charges are considered part of the sale and are therefore taxable if the sale itself is taxable. If you are selling a non-taxable item, delivery charges are also not taxable.

Washington: If the items being shipped are taxable, shipping and handling are taxable. For mixed shipments of taxable and non-taxable items, there should be two separate, fairly allocated charges for the taxable and non-taxable portions; only then is the shipping charge for the non-taxable items not taxable. Otherwise, the shipping and handling are taxable.

West Virginia: Delivery charges are considered part of the final sale and are thus taxable. If the items you are shipping are not taxable, you generally do not need to charge sales tax on the shipping charges. For mixed shipments, it's generally understood to apportion tax to the taxable items, though not explicitly detailed in the source.

Wisconsin: If the goods or services you are selling are subject to sales tax, then any delivery charge (including shipping via USPS or a company van) is also taxable. For mixed shipments, you are required to determine the percentage of the package that comprises taxable items and tax only that corresponding percentage of the shipping charges.

In these states, you can generally avoid collecting sales tax on shipping charges by clearly listing them separately on the invoice and meeting specific conditions.

Alabama: Shipping and handling charges are not taxable if you use a common carrier or the U.S. Postal Service, and the charges are billed separately and paid directly or indirectly by the purchaser. Shipping is taxable if you deliver goods in your own vehicle or if shipping and handling are included in the price of the goods.

Arizona: Actual freight charged by the retailer to deliver goods to the purchaser is not taxable if separately stated on the invoice. If the cost of shipping and handling is included in the retail sales price, it is considered taxable.

California: California's rules are complex. Shipping charges may be non-taxable if three criteria are met: 1. You ship directly to the purchaser by common carrier, contract carrier, or U.S. mail. 2. Your invoice clearly lists shipping, handling, or delivery charges separately. 3. The charge is not greater than your actual cost for delivery. Shipping can be partially taxable if the charge exceeds your actual cost (the excess amount is taxable) or if shipping and handling costs are combined (handling is taxable). Shipping is fully taxable if: records are inadequate, you deliver with your own vehicle, you make a separate charge for fuel or handling, the delivery charge is included in the unit price, or "freight-in" cost is included.

Colorado: Shipping and handling are generally not taxable if two conditions are met: 1. The charges are separable from the purchase (meaning the buyer could choose alternative transportation, such as picking up the goods themselves). 2. The charges are listed separately on the invoice. For online sellers, if the customer cannot pick up the item, the shipping may be considered mandatory and thus taxable. Shipping related to tax-exempt sales (e.g., tax-exempt items, sales to a charity, or shipping out of state) is also not taxable.

Florida: Shipping charges and handling fees are generally considered taxable when part of the total price of taxable goods or not separately stated. However, shipping fees may be exempt if they are listed separately from the product price and delivery is optional (the customer has the choice to pick up the item). If delivery is not optional (e.g., for FBA sellers), shipping is taxable even if separately stated.

Idaho: Shipping and handling charges are generally not taxable as long as they are separately stated on the invoice. However, if you order an item from another seller/manufacturer, it ships to you first, and then you ship it to the customer, the initial shipping and handling charges you paid (and pass to the buyer) are taxable. To avoid this, it's recommended to have the original seller ship directly to your customer.

Illinois: Shipping is taxable when it is mandatory (the buyer cannot avoid it by picking up the order) or if it is not separately stated on the invoice or contract. If the shipping charge is optional and separately stated, then it is non-taxable.

Iowa: Sales tax does not have to be charged on shipping and handling if the seller either separately invoices these charges or states them separately on the bill.

Kansas: As of July 1, 2023, shipping charges in Kansas are not taxable.

Maine: To avoid sales tax on shipping and handling, a seller must do three things: 1. Ship the item directly to the buyer. 2. Separate the charges for shipping from other charges, including handling, on the bill (if shipping and handling are combined, the cost of transportation is not considered separate). 3. The shipment must be made by a common or contract carrier or US Mail.

Maryland: Sellers are generally not required to pay sales tax on shipping, as long as the shipping charge is separately stated on the invoice and separated from any handling fee. If shipping is combined with a handling or processing fee, then the entire combined charge is taxable. Handling charges are taxable.

Massachusetts: Shipping fees that are separately stated on an invoice and occur after the sale has been finalized are generally exempt from sales tax. The shipping charge must also reasonably reflect the costs of transportation. If shipping and handling charges are combined into a single line item or included in the sale price, the entire amount may become taxable.

Michigan: As of April 26, 2023, most delivery and installation charges are not subject to sales and use taxes if the seller separately itemizes them on an invoice and keeps records showing how the tax was calculated. These charges remain taxable if not billed or recorded properly, or if the transaction involves utility sales of electricity, natural gas, or artificial gas.

Missouri: As of August 28, 2017, shipping charges in Missouri are no longer taxable. If you sell online and charge for shipping, you will most likely not need to charge sales tax on the shipping charge.

Nevada: Transportation, shipping, and postage charges are not taxable if separately stated on the customer's invoice. However, if other charges (like handling) are combined with "delivery charges," the entire delivery charge is likely taxable.

Oklahoma: You will not have to charge sales tax on shipping and handling if the charge is separately stated on the invoice. If the shipping and handling charge is included as part of the price of the goods, then it is taxable.

Utah: You will not charge sales tax on shipping and handling if those charges are listed separately on the invoice and are not incorporated into the purchase price of the property. The only shipping-related matter that is taxable under Utah law is "freight-in," which refers to shipping charges billed to the seller as part of the seller’s cost of the merchandise.

Virginia: If shipping charges are separately stated on the invoice, they are not taxable. However, if a "shipping AND handling" charge appears on the invoice (even if separated from the goods price), the entire combined charge is taxable because handling charges are taxable in Virginia. To ensure shipping is non-taxable, it must be listed separately from every other charge, including handling.

Wyoming: "Outbound freight," which includes shipping, delivery, or shipping and handling charges, is exempt from Wyoming sales tax if it is separately stated and distinguishable from any taxable charges on the same invoice. This applies to both intrastate (in-state) and interstate (state-to-state) outbound freight.

Understanding and applying these varied state-specific sales tax rules can be overwhelming for businesses, especially ecommerce sellers managing transactions across multiple states. Kintsugi AI, our groundbreaking AI solution, offers intelligent automation and predictive insights to help you accurately calculate and apply sales tax on shipping charges. By automating sales tax management, Kintsugi helps you streamline invoices, reduce errors in taxation, and stay compliant with ever-changing tax laws, freeing you to focus on growing your business.

Sales tax rules and laws are subject to change at any time. This article is for informational purposes only. For specific sales tax advice regarding your business, please consult a qualified tax advisor.