Shipping charges come up whenever a business ships items and passes the cost along to the buyer, not just for online merchants. Shipping charges are complex in sales tax because they can be included in the price of the sale as taxable and the rules vary by state. It also depends on who is making the delivery — a common carrier or your company. Knowing the rules in states where you do business and send shipments is important to sales tax compliance. In some states, like Mississippi, shipping is taxable if it is carried by a common carrier, even if the charge is listed separately from the price of the goods. In other states, like Maine, shipping isn’t taxable as long as it is separately stated on the invoice.
Add into the equation your own shipping department that makes the delivery and it can get even more complex. Since each state varies when it comes to rules on the taxability of shipping charges, it’s important to know the laws that impact your business. The first step to figuring out if you need to collect sales tax on shipping is determining where you’re shipping and in which states you have nexus. For states where you have nexus, you’ll want to look up the laws and statutes on shipping and sales tax to see if you need to charge sales tax on your shipping charges.
If you’re a brick-and-mortar business, first check your own state’s rules on shipping charges and sales tax. Since you have nexus in that state and might not have nexus in any other, it may be the only state you need to pay attention to for sales tax on shipping charges. If you’re shipping to other locations, be sure to check your nexus first before digging into sales tax laws on shipping charges—you might not even need to worry about it.