Overview of the Issue
We have a client in Norcross, GA, that has a mish-mash of pickup and delivery for a variety of consumer goods. He is currently under audit, and the latest development concerns where and when sales tax must be applied on the gross receipts of his sales.
Defining Delivery Charges
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 so there’s no confusion. Fuel, crating, postage, and whatever else it takes to get that item from Point A to Point B counts as “shipping.”
Sales Tax Applicability
Taxation of Delivery Charges
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 essentially states 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 situations where 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.
Key Considerations
While there’s further breakdown, these two points in the document make it clear that shipping is absolutely taxable in Georgia IF the product you are selling is taxable.
- If the product is not taxable, then shipping also isn’t taxable.
- If sending a mixed shipment (some products taxable, some not), you have two options:
- Charge sales tax on the entire amount of the shipping fee collected
- Charge sales tax on just the percentage of the shipment that is taxable, which can be determined either:
- By weight
- By price
Frequently Asked Questions
What are delivery charges in the context of Georgia sales tax?
Delivery charges include any costs related to preparing and transporting goods to a buyer’s designated location. This encompasses shipping, handling, postage, packing, crating, fuel surcharges, and similar expenses. These are generally taxable if associated with a taxable sale.
Are delivery charges always subject to sales tax in Georgia?
Yes, in Georgia, delivery charges are taxable when associated with the sale of tangible personal property. This holds true whether the delivery charge is optional, required, bundled, or separately stated on the invoice.
If I sell both taxable and non-taxable items in one shipment, how is sales tax on delivery handled?
You can either tax the full delivery charge or allocate the delivery charge proportionally. The allocation can be based on either the price or weight of the taxable items in the shipment.
Are delivery charges still taxable if they are listed separately on the invoice?
Yes. Even if delivery charges are clearly listed as a separate line item on the invoice, they are still subject to Georgia sales tax if the underlying goods are taxable.
What happens if only non-taxable goods are shipped?
If the entire shipment consists of non-taxable goods, then the delivery charges related to those goods are also not subject to Georgia sales tax.