A client of mine recently hired a bookkeeper to do her state and local taxes and was surprised to find out that she should be collecting sales tax on shipping and handling.
I wanted to write this article to provide help for other online retailers who may be asking the same question, because the answer was a bit hard to find.
If you’re in Washington State, here’s the link to the law: WAC 458-20-110. Shipping is considered a “Delivery Charge”.
Gross proceeds of sales and selling price include all consideration paid by the buyer, without any deduction for costs of doing business such as material, labor, and transportation costs, including delivery charges. Thus, delivery charges by the seller are a component of these tax measures.
Delivery charges by the seller making a retail sale are a component of the selling price. If the sale of the tangible personal property or service is exempt from retail sales tax, such as certain “food and food ingredients,” retail sales tax does not apply to the selling price, including delivery charges, associated with that sale. Similarly, if the product is sold at wholesale, retail sales tax does not apply to the delivery charges of that sale.
Now, again, this law only applies to the State of Washington. And you only charge Sales Tax if you are a business in Washington and selling to a customer in Washington and if the item you’re selling is subject to Sales Tax. If you’re in a different state, you should look up the appropriate law or consult with a local tax person.
Note: This article is not a substitute for professional tax advice. Please consult with a local tax expert to get the right answer for your online business.Jill
Aldebaran Web Design, Seattle
Jill Olkoski has a BS in Engineering, a BS in Computer Science and an MA in Clinical Psychology. She delights in using her advanced technical and psychological skills to help small business owners develop cost-effective and successful websites.