Shipping and Delivery Charges (Publication 100)

California sales tax may apply to charges for delivery, shipping, and handling. To help you apply tax properly in your business, we've created the quick reference guide (see Applying Sales Tax). It gives examples of common shipping situations and charges and explains how sales tax applies in each situation. Be sure to read the notes and exceptions in the chart (the "fine print") and to remember that more than one condition may apply to your specific sale. Please consider the following basic information before you review the quick reference guide.

Make sure that your invoices are clear

Be sure that your invoices and receipts use specific terms to describe delivery–related charges. If you are charging for shipping, which may not be taxable, use terms such as shipping, delivery, freight, or postage. If you are charging for handling, which is taxable, be sure to use that term on your invoice. This will help you determine how to apply tax and will make things clearer for your customers. It will also make it easier for everyone if we audit your records.

Keep good records

It's important to keep good records that fully document your shipping costs. Acceptable forms of documentation include:

• Bills of lading
• Freight invoices
• Express receipts or express company invoices
• Parcel post receipts or shipment records
• Sales invoices showing transportation charges and shipping instructions
• Delivery receipts and expense vouchers supporting your delivery expense
• Correspondence stating requirement and completion of delivery
• Title transfer agreements

Please note: If you do not keep records showing the actual cost of an individual delivery, tax applies to your entire delivery charge if it is made in connection with a taxable sale.

Take care when you complete your sales and use tax return

You must report your total sales for the reporting period on your sales and use tax return. If your total sales include nontaxable delivery charges, you should take a deduction for those amounts on the line for "Other" deductions. If you don't take the deduction, you'll pay more tax than you owe.

Please note: This publication summarizes the law and applicable regulations in effect when the publication was written, as noted above. However, changes in the law or in regulations may have occurred since that time. If there is a conflict between the text in this publication and the law, decisions will be based on the law and not on this publication.