Shipping is completely different from “shipping and handling,” in a sales tax audit. In one situation, as long as you use a third-party carrier and separate it as a different line item, it is a nontaxable component of the bill. However, the word handling brings everything into the bundle of a taxable item.
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The word handling can change an entire sales tax audit. I’m Mansoor Ansari with Nexus Tax Defense. If you’re selling merchandise and using a third-party carrier for the shipping, then you’re almost halfway there in terms of not having to charge sales tax on the actual cost of the shipping. Shipping still needs to be its own line item. However, if you up charge your customer on the cost of shipping or add the word handling then the entire shipping cost is subject to sales tax. In summary, if you do not want to expose yourself to sales tax on delivery charges, then do the following: number one, use a third-party shipping company; number two, do not up charge on the shipping cost; and, number three, do not add the word handling fee on your invoice. Thank you.
