How to handle sales tax on shipping: A state-by-state guide

This post has been updated. It was originally published in February 2022. 

It’s more important than ever for retailers to understand sales tax on shipping. U.S. online retail sales were expected to reach $1.2 trillion in 2024 and could hit $1.6 trillion by 2028, according to Retail Dive. Since the majority of online sales are delivered to consumers, getting shipping tax right is essential for sales tax compliance.

Is shipping taxable? Just as there’s no one way to get products into the hands of customers, there’s no one way to tax delivery charges: Shipping tax laws vary by state and the sales tax on shipping can be affected by the delivery method, whether the products being shipped are taxable or exempt, and other factors. 

Read on to discover:

• How do states tax shipping and delivery charges?
• Should you charge sales tax on items shipped out of state?
• Shipping tax FAQ

Sales tax laws can be highly nuanced. Charges for a company to deliver goods in its own vehicle are often taxed differently than charges for delivery by common carrier or private carrier. A combined charge for shipping and handling services may be taxed differently from separate charges. 

That said, there are some general rules of thumb.

1. When shipping costs are included in the sale price and delivery is by common carrier or the U.S. Postal Service (USPS): 
   • If the contents of the shipment are taxable, retailers generally need to charge sales tax on shipping. 
   • If the contents of the shipment are exempt, the shipping charge is typically exempt. 
   • If the shipment contains both exempt and taxable products, shipping costs allocated to the taxable sale are often taxable, while the portion attributed to the exempt sale is exempt. 
2. When delivery is made in a vehicle owned or leased by the retailer, transportation charges are usually subject to applicable sales taxes.

The following guide provides more detailed information for each state and answers frequently asked questions like, Do you charge sales tax on items shipped out of state? and Is there sales tax on U.S. postage stamps?

What follows is not tax advice. Sales tax laws are subject to change. Please confirm all information with the state department of revenue or a trusted tax advisor.

Alabama

Transportation charges billed as a separate item (identifiable from other charges) and paid (directly or indirectly) by the purchaser are exempt from Alabama sales tax when delivery is by common carrier or the USPS. Transportation charges included in the sale price are not considered separate and identifiable and therefore are not excluded from Alabama sales tax. For more details, see Rule 810-6-1-.178 and the Alabama Department of Revenue.

Arizona 

Charges for delivery from a retailer’s location to a purchaser’s location are generally exempt if separately stated on the invoice. Freight costs incurred prior to retail sale are considered part of the gross sale and are therefore taxable. In general, Arizona transaction privilege tax (TPT) does not apply to freight costs billed to and collected from a purchaser by a retailer for tangible property shipped directly from a manufacturer or wholesaler to the purchaser (aka, drop shipments). See Ariz. Admin. Code § 15-5-133 and the Arizona Department of Revenue.

Arkansas

Arkansas sales tax on shipping applies if the products being shipped are taxable and does not apply if the products are exempt. If a shipment includes both taxable and exempt property, tax typically applies to the percentage of the delivery charge allocated to the taxable property. Sales tax does not apply to freight charges billed directly to the purchaser by a common carrier. See the Arkansas Department of Finance and Administration.

California

For the most part, there’s no California sales tax on shipping if the sale is exempt. If the sale is taxable, delivery-related charges may be nontaxable, partially taxable, or fully taxable. 

Delivery-related charges for taxable products generally are not taxable when a business ships directly to a purchaser via common carrier, contract carrier, or USPS; delivery, shipping, freight, or postage charges are separately stated; and the charge is not greater than the actual cost of delivery. Delivery-related charges for taxable sales may be partially taxable if the above conditions are true but a business charges a purchaser more for shipping than the actual shipping costs, or if there is a combined charge for shipping and handling. Handling charges are taxable in California.

Delivery-related charges for taxable sales generally are subject to California sales tax if: a business delivers merchandise in its own vehicle; there’s a separately stated charge for fuel surcharge, handling, or other service; a delivery charge is included in the unit price of the item; or the purchaser is charged the cost of shipping the merchandise to the seller’s place of business. 

It’s important to keep accurate records that show the true cost of delivery. See the California Department of Tax and Fee Administration.

Colorado

Delivery and freight charges for taxable sales generally are not subject to sales tax in Colorado provided the charges are 1) separately stated on the customer invoice and 2) separable from the purchase. A charge is considered separable from the purchase if it’s for service performed after the property is offered for sale and the consumer has the option to arrange their own shipping — including but not limited to picking up the property from the seller’s location. 

Delivery and freight charges related to exempt transactions are generally exempt because they’re considered part of the exempt sale. Different rules may apply for local sales tax. See the Colorado Department of Revenue.

Connecticut

Shipping and delivery charges for taxable sales are generally subject to Connecticut sales and use tax whether separately stated or included in the sale price, and whether provided by the seller or a third party. Shipping and delivery charges for exempt sales are exempt. See the Connecticut Department of Revenue Services and Chapter 219, Sections 12-407(a)(8), 12-407(a)(9).

Florida

Florida sales tax applies to the total sales price of taxable tangible personal property, which includes services considered part of a sale. Charges to deliver taxable items are generally subject to Florida sales tax. 

However, delivery charges are generally exempt from Florida sales tax when the charge is separately stated and the purchaser has the option to pick up the item or arrange their own third-party transportation services. See the Florida Department of Revenue.

Georgia

Charges for delivery, freight, transportation, or shipping and handling are generally considered part of the sale price; they’re exempt from Georgia sales tax if the sale is exempt and taxable if the sale is taxable. 

Charges for delivery not associated with the sale of taxable property are not taxable. See the Georgia Department of Revenue.

Hawaii

Hawaii’s general excise tax (GET) is a privilege tax imposed on business activity in Hawaii. It generally applies to most transactions, including shipping and handling charges. See the Hawaii Department of Revenue.

Idaho

Charges for handling and shipping goods directly to a buyer are not taxable if separately stated on the invoice. However, fees charged for shipping goods to the retailer (freight-in fees) are subject to Idaho sales tax, even if separately stated. See the Idaho State Tax Commission.

Illinois

For retail sales, shipping and handling charges for taxable goods are subject to Illinois sales and use tax when 1) the charges are not separately stated on the contract or invoice; or 2) the charges are separately identified but the seller does not offer the purchaser the option to receive the property in any manner except by delivery from the seller (i.e., no pickup option is given).  

An optional and separately stated shipping charge for taxable goods is generally considered nontaxable. Shipping for exempt transactions is also generally exempt from Illinois sales and use tax.

If a shipment contains both taxable and exempt products, the entire delivery charge may be subject to Illinois sales tax. However, a lump-sum delivery charge would be exempt if the price of the items for which delivery is nontaxable is greater than the price of the items for which delivery is taxable. And if delivery charges are separately stated and can be calculated on each item of a shipment, charges to ship the exempt items would be exempt while charges to ship taxable goods would be taxable. See the Illinois Department of Revenue.

Indiana

Shipping and handling charges incurred on behalf of the seller of taxable goods are generally taxable in Indiana, whether included in the sale price or separately stated. Charges to deliver exempt property are generally exempt, as are delivery charges billed and furnished by a third party. See the Indiana Department of Revenue.

Iowa

Separately itemized delivery charges are generally exempt from Iowa sales and use tax. However, inbound freight or freight-in charges — charges for the seller to obtain merchandise sold to customers — are generally taxable if passed on to the customer or added to the price of a taxable retail sale. See the Iowa Department of Revenue.

Kansas

As of July 1, 2023, separately stated charges for shipping and handling are not included in the sales or selling price so are not subject to Kansas sales tax. If included in the sale price, shipping charges are generally subject to sales tax. See the Kansas Department of Revenue.

Kentucky 

Delivery charges are included in the sale price, therefore they’re subject to tax if the sale is taxable but exempt if the transaction is exempt. See the Kentucky Department of Revenue and KRS 139.010(17)(a)4.

Louisiana

For taxable sales, delivery and shipping charges included in the sale price are generally subject to the Louisiana state sales tax. Separately stated charges to deliver tangible personal property to a place designated by the buyer generally are not subject to the state sales tax. 

There may be no sales tax on shipping if charges are separately stated and the purchaser has the option to separately contract for shipping (e.g., by picking up the goods or arranging a third-party delivery). Additionally, state sales tax generally does not apply to separately stated freight, shipping, or delivery charges when transportation is rendered subsequent to the sale (this must be clearly stated). 

Different rules may apply for local sales tax because Louisiana is a home-rule state. See the Louisiana Department of Revenue.

Maine 

Shipping charges are not part of the taxable sale price — and are nontaxable — when all three of the following conditions are met: 

1. The product is shipped directly to the customer.

2. The shipment is made through a common or contract carrier or the U.S. mail.

3. The shipping cost is stated separately from the cost of the property or any other charges, like handling fees.

Handling charges are considered part of the sale price whether separately stated or not. See the Maine Revenue Services.

Maryland

Separately stated shipping or delivery charges are not subject to Maryland sales and use tax. However, delivery charges included in the taxable price are generally taxable, as are standalone handling charges and combined shipping and handling charges. See the Comptroller of Maryland.

Massachusetts

A seller’s charge to prepare and deliver goods to a location designated by the purchaser is excluded from the sales price subject to tax. Separately stated shipping and delivery charges are generally exempt from Massachusetts sales and use tax provided the charges are reasonable and reflect the cost of preparing and moving the goods to the customer, and delivery occurs after the purchase takes place. Shipping and handling charges that exceed the actual cost of handling and delivery are generally taxable. 

Charges to transport property to the vendor (freight-in charges) are considered part of the vendor’s overhead and are included in the sales price subject to tax. See the Massachusetts Department of Revenue.

Michigan

As of April 26, 2023, most delivery charges are exempt from Michigan sales tax provided they’re separately stated and the seller keeps adequate records. However, Michigan taxes delivery charges not separately stated or properly recorded. See the Michigan Department of Treasury.

Minnesota

Shipping and handling are part of the sales price, even if separately stated. Thus, charges to deliver taxable items are generally taxable, while the shipping cost for exempt items is generally exempt. 

If the delivery charge is one lump sum for both taxable and exempt products, sales tax on shipping and delivery charges should be allocated based on either the percentage or weight of taxable goods. Where charges to deliver both taxable and nontaxable items are separately stated, only the charges to deliver taxable items are subject to sales tax. See the Minnesota Department of Revenue.

Mississippi 

Retailers generally need to charge sales tax for the shipping, handling, and delivery of taxable goods in Mississippi. However, there’s no sales tax on shipping if the product being shipped or delivered is exempt. 

Sales tax is also due on charges to transport goods moving between points within Mississippi when they’re paid directly by the consumer but not paid to the seller of the property; in this case, the consumer must pay the tax directly to the Department of Revenue. See the Mississippi Department of Revenue.

Missouri

Handling and shipping charges for taxable goods are generally taxable in Missouri when included in the sale price. In other words, if the purchaser is required to pay for shipping as part of the sale price, the entire sale price is taxable. Separately stated transportation charges are generally exempt provided the purchaser is not required to pay for the service. See the Missouri Department of Revenue.

Nebraska

Shipping and handling charges are generally taxable in Nebraska when the sale is taxable and the charges are paid to the retailer. There’s generally no sales tax on shipping when the sale is exempt. 

If there’s a single delivery charge for a shipment of exempt and taxable property, tax should be allocated. Charges for delivery, freight, postage, shipping, or transportation paid to a person other than the retailer are generally exempt. See the Nebraska Department of Revenue.

Nevada

Delivery charges are subject to Nevada sales tax when part of the sale of tangible personal property. Separately stated postage, shipping, and transportation charges are generally exempt, but crating, handling, packaging, or similar shipping charges are taxable whether separately stated or included in the sale price. Charges for freight or transportation before the sale of tangible goods (i.e., inbound freight) is taxable. See the Nevada Department of Taxation.

New Jersey

Most charges associated with the shipping, handling, and delivery of taxable goods are subject to New Jersey sales tax, though delivery and handling charges for exempt sales are generally exempt. When a shipment includes both taxable and exempt goods, the seller should charge sales tax on the portion of the delivery charge allocated to transport the taxable goods (determined by weight or price). If the seller does not allocate the delivery charge, the whole charge is taxable. See the New Jersey Division of Taxation.

New Mexico 

New Mexico Gross receipts tax generally applies to delivery and shipping charges, whether separately stated or included in the sale price. See the New Mexico Taxation and Revenue Department.

New York

The shipping, handling, and delivery of taxable sales are generally subject to New York sales tax. For nontaxable sales, these charges are generally exempt. 

Combined charges for shipping both taxable and exempt sales are generally taxable, but if transportation charges are separately stated and fairly allocated between taxable and nontaxable sales, then shipping charges for the taxable sales are taxable and shipping charges for the exempt sales are exempt. 

Sales tax is not imposed on delivery services sold independently from the sale of the taxable goods. See the New York State Department of Taxation and Finance.

North Carolina

Shipping and handling, transportation, and delivery charges imposed by a retailer and connected with the sale of taxable personal property, certain digital property, and certain services in the state are generally subject to North Carolina sales and use tax whether included in the sales price or separately stated. 

If both taxable and exempt sales are listed on an invoice, shipping and handling charges should be allocated proportionally to each item (based on price or weight). See the North Carolina Department of Revenue.

North Dakota

Freight, delivery, and other transportation charges, including shipping and handling, are considered part of the sales price in North Dakota: The retailer should charge sales tax if the sale is taxable but not if it’s exempt. 

Charges billed directly to the customer by a delivery provider not connected to the sale of tangible personal property are generally exempt. See the North Dakota Department of Revenue.

Ohio

Delivery charges are considered part of the sales price in Ohio whether separately stated or included in the price, so they’re taxable if the sale is taxable and exempt if the sale is exempt. If one delivery charge includes both taxable and exempt sales, it can be allocated (by weight or sales price) so tax is only charged to ship the portion of the shipment that’s taxable. If it is not allocated, tax applies to the whole shipping charge. 

Charges for delivery are exempt if paid by a customer to a delivery company and not imposed or collected by the seller of the goods shipped. See Ohio Laws and Administrative Rules and the Ohio Department of Taxation.

Oklahoma 

Separately stated shipping and handling charges are exempt in Oklahoma, whether the contents of the package are taxable or exempt. Shipping and handling charges included in the selling price of taxable tangible personal property are taxable. See Okla. Admin. Code § 710:65-19-70 and the Oklahoma Tax Commission.

Pennsylvania

Charges for the shipping and handling of taxable goods are generally subject to Pennsylvania sales tax. If the item being shipped is exempt, the shipping and handling charges are generally exempt. If a shipment contains both taxable and exempt items, the shipping and handling charge must be proportionately allocated; charges to ship taxable goods are taxable and charges to ship exempt purchases are exempt. If no breakout is provided, all shipping and handling charges are taxable. 

Charges for delivery made and billed by a third party are exempt. See the Pennsylvania Department of Revenue.

Rhode Island

Charges for delivery (including handling charges) are considered part of the sales price, so they’re exempt when the sale is exempt and taxable when the sale is taxable. If a shipment contains both taxable and exempt goods, the seller should allocate the delivery charges by sales price or weight. See the Rhode Island Division of Taxation.

South Carolina 

Shipping costs for taxable goods are generally taxable in South Carolina, while charges to ship exempt goods are generally exempt. 

The taxability of charges for a retailer to deliver tangible personal property in its own truck depends on whether the terms are free on board (FOB) destination or FOB shipping point (or origin): FOB destination is generally taxable and FOB shipping point is generally exempt. See the South Carolina Sales Tax Manual at the South Carolina Department of Revenue.

South Dakota 

A retailer’s charge for delivery and handling of taxable products is taxed like the product being shipped, whether separately invoiced or on the same invoice as the product. Since most sales in South Dakota are taxable, shipping and handling charges are generally taxable. However, if the sale is exempt, shipping and handling charges are also exempt. 

If both taxable and nontaxable products are in the same shipment, sales tax is due on the portion of the delivery charge for the taxable products (determined by sales price or weight). If a retailer hires a third party to make a delivery and bills the customer for the delivery, the retailer must include the transportation charges in their taxable receipts. See the South Dakota Department of Revenue.

Tennessee

Delivery charges billed by a seller are part of the sales price in Tennessee regardless of whether they’re separately stated on the invoice. If the sale is taxable, the delivery is taxable; if the sale is exempt, the delivery is exempt. If a shipment contains both exempt and taxable sales, sales tax applies to the percentage of the shipment that’s taxable (determined by weight or sales price). See the Tennessee Department of Revenue.

Texas

In Texas, shipping and delivery are taxable if the sale is taxable but exempt if the sale is exempt. See the Texas Comptroller of Public Accounts.

Utah 

Delivery charges (including but not limited to transportation, shipping, postage, handling, crating, or packing) are excluded from the sales price in Utah. If separately stated on the customer invoice, the delivery charge is not subject to Utah sales and use tax. See the Utah State Tax Commission. 

Vermont 

If an item is subject to Vermont sales tax, delivery and freight charges for the item are taxable. If a sale is exempt, associated delivery costs are also exempt. When a shipment contains both taxable and exempt goods, tax applies only to the taxable portion of the order (based on the percentage of the price or the weight of the taxable items in the package). There’s generally no sales tax on stand-alone shipping charges not associated with a retail sale. See the Vermont Department of Taxes.

Virginia

Separately stated shipping charges are generally exempt from Virginia sales tax, but handling charges are always taxable. If not separately stated on the invoice, shipping charges for taxable goods are taxable. If combined with handling charges or other charges as a single charge, they’ll become part of the sales price of the property and will be subject to sales tax. See 23VAC10-210-6000 and the Virginia Department of Taxation.

Washington 

Tax applies to charges to deliver products subject to retail sales taxes in Washington state, even if the delivery charges are billed separately or the seller is also the carrier. However, charges to deliver exempt goods are generally exempt. 

If a shipment contains both taxable and exempt goods, tax applies to the percentage of the delivery charges due on the taxable goods (determined by sales price or weight). See the Washington State Department of Revenue.

West Virginia 

Shipping and handling charges are considered part of the purchase price in West Virginia. For taxable sales, the charges are generally taxable; for exempt sales, they’re generally exempt. See the West Virginia Tax Division and the Streamlined Sales Tax West Virginia Taxability Matrix.

Wisconsin

Delivery charges for taxable sales are generally taxable in Wisconsin, whether delivery is by common or contract carrier, USPS, or the seller’s vehicle. Delivery costs for exempt sales are generally exempt. If a shipment includes both taxable and nontaxable sales, the portion allocated to nontaxable sales is exempt; if no allocation is made, the entire charge is taxable. See the Wisconsin Department of Revenue.

Wyoming

Shipping and handling charges for retail sales of taxable goods (aka, outbound freight) are generally exempt from Wyoming sales tax provided the delivery charges are separately stated and distinguishable from any taxable charge that may appear on the same invoice. If the vendor includes the shipping charge in the cost of the taxable item, the full amount is subject to Wyoming sales tax. See the Wyoming Department of Revenue.

Washington, D.C. 

Shipping and handling charges are generally taxable in the District of Columbia if included as a single item on the bill, but separately stated shipping and delivery charges are generally exempt. Sales tax also generally applies when the pickup and delivery of taxable goods is in the District and a separate charge is made. See the District of Columbia Office of Tax and Revenue.

It depends. In most states, the tax on delivery charges is typically governed by the location of the delivery. A retailer that has sales tax nexus with the state where delivery takes place must comply with all applicable sales and use tax laws, including charging tax on shipping costs if they’re taxable in that state.

The Kansas Department of Revenue explains it like so: “If the retailer sells merchandise to be shipped or delivered to the purchaser out of state, then the sale is considered to occur out of state, and no Kansas sales tax is due.” However, the retailer may be required to collect and remit the other state’s sales tax on the shipping charges. If the retailer does not have nexus with the other state and therefore is not required to collect and remit sales tax in that state, “the out-of-state purchaser may owe compensating use tax in the state where the purchaser is located.”

The Arkansas Department of Finance and Administration encourages Arkansas businesses to contact tax departments in other states “to determine if you have the requirement to collect their taxes.” It’s a good rule of thumb.

Is shipping taxable?

As you can see from the state-specific details detailed above, the sales tax on shipping varies by state and circumstances. There’s no one-size-fits-all shipping tax policy.

Can I ship something to another state to avoid sales tax?

If you buy taxable goods to consume, store, or use in your home state, you’re required to pay the applicable sales or use tax. If a seller does not collect sales tax at the point of sale, the buyer becomes responsible for paying consumer use tax directly to the appropriate tax authority.

I live in Washington state, which has a sales tax. Were I to buy myself some books and have them delivered to my house, I’d pay Washington sales or use tax. If I purchased the books as a gift and had them delivered to my brother in New Hampshire — a state with no sales tax — I probably wouldn’t be charged sales tax because the books would be used and stored in New Hampshire. If I sent my brother the books simply to skirt my tax obligations and asked him to send the books right back to me, I’d end up owing Washington use tax on the books’ value.

Is sales tax based on shipping address or store address?

It depends on each state’s sourcing rules. In most states, sales tax is based on the location where the consumer takes possession of the goods; for delivery orders, this is usually the delivery or shipping address. But a few states, including Illinois and Texas, base sales tax for certain transactions on the ship-from address. 

Read Is sales tax based on shipping address or billing address? for more information.

Are stamps taxable?

Again, sales tax laws vary by state. Here are a few examples.

Stamps sold for postage are generally exempt from California sales tax, and separately stated “postage charges” (the purchase price of stamps or similar charges for mail or parcel delivery through the U.S. postal service) are exempt from Indiana sales tax. 

In Minnesota, postage is considered part of the sales price. If the item sold is taxable, the postage is taxable; if the item is exempt, the postage is exempt. New Mexico gross receipts tax generally applies to postage whether it’s separately stated or included in the selling price. 

Can sales tax software help with shipping tax?

Yes.

Consumers want shipping to be cheap, fast, and reliable. They also want it taxed correctly — or at least they don’t want to pay sales tax on shipping unless necessary. So it’s critical for retailers to handle sales tax properly.

Automating sales tax collection, remittance, and filing is the most effective way to get sales tax compliance right, especially for retailers required to collect and remit sales tax in multiple states.

Cover photo by Canva