Not certain when to tax shipping charges? Our accountants lay down the basics for shipping and when to charge to tax!
“Be sure that your invoices and receipts use specific terms to describe delivery–related charges. If you are charging for shipping, which may not be taxable, use terms such as shipping, delivery, freight, or postage. If you are charging for handling, which is taxable, be sure to use that term on your invoice. This will help you determine how to apply tax and will make things clearer for your customers. It will also make it easier for everyone if we audit your records.” -CDTFA
Here are some useful definitions when shipping goods:
- Freight typically refers to larger quantity of goods
- Shipping on the other hand refers to a smaller quantity
- Handling refers to the act of taking or holding something in your hands. For example: The packaging and labeling of something to be shipped, which is why the CDTFA advises to tax anything with “handling” because this is considered a service since someone is handling the item and packing it.