Georgia sales tax audit on shipping charges
We have a client in Norcross, GA, that has a mish-mash of pick up and delivery for a variety of consumer goods. He is currently under audit and the latest development has been where and when sales tax must be applied on the gross receipts of his sales.
Let’s start off by defining delivery charges below:
“Delivery charges” means charges by the seller of tangible personal property or services for preparation and delivery to a location designated by the purchaser of the tangible personal property or services, including but not limited to charges for transportation, shipping, postage, handling services, crating, and packing; fuel surcharges; split shipment charges; small order charges; and other similar charges. The term “delivery charges” does not include postage charges for the delivery of direct mail when the postage charge is passed on dollar-for-dollar without being marked up to the purchaser of the direct mail and separately stated on an invoice or other similar billing document given to the purchaser.”
Basically, they’re going into detail that, yes, you have to charge sales tax for shipping costs. They break it down by describing the shipping process and costs down so there’s no confusion. So fuel, crating, postage, and whatever else it takes to get that item from Point A to Point B counts as “shipping.”
The next part of the document says:
“Where taxable tangible personal property is sold at retail and the seller makes a delivery charge, the charge is taxable regardless of whether the charge is optional (i.e., not required to complete the underlying sale of the tangible personal property) or separately stated.”
This part of the document basically says that no matter how the item is packaged with the shipping costs, if you charge for shipping you need to collect sales tax on it. This includes if the sales tax is included in the cost OR if it’s separately stated. Also, even if the shipping charge is optional Georgia STILL wants you to collect on it.
While there’s further breakdown, these two points on the document make sure you know that shipping is absolutely taxable in Georgia IF the product you are selling is taxable.
If the product you are selling isn’t taxable, then shipping also isn’t taxable. But if you are sending a mixed shipment (some products are taxable and some are not) then you have two options:
- Charge sales tax on the entire amount of shipping fee collected
- Charge sales tax on just the percentage of the shipment that is taxable (you can determine this amount either by weight or by price)
Georgia sales tax audit on shipping charges
