Shipping and Delivery Charges (Publication 100)
Applying Sales Tax

Applying Sales Tax to Delivery–Related Charges
Condition of sale or type of delivery charge Notes and exceptions
Sale is not a taxable transaction. Related charges are not taxable.
Sale is a taxable transaction. Delivery–related charges may be nontaxable, partially taxable, or fully taxable. See rest of table.

Delivery–related charge is not taxable when:
Condition of sale or type of delivery charge Notes and exceptions

All of these conditions must apply:

  • You ship directly to the purchaser by common carrier, contract carrier, or US Mail;
  • Your invoice clearly lists delivery, shipping, freight, or postage as a separate charge;
  • The charge is not greater than your actual cost for delivery to customer.
  1. Exception: Charge is taxable if you do not maintain records that show the actual cost of the delivery (see Invoices and Records).
  2. If the tax amount calculated for the sale was based on the cost of the item plus the nontaxable delivery charge, you must refund the tax amount collected on the delivery or pay that amount to the CDTFA.
  3. See sections that discuss “handling” charges.

Delivery–related charge is partially taxable when (for taxable sales only):
Condition of sale or type of delivery charge Notes and exceptions
Delivery meets conditions in box above, except: your charge to the customer for delivery is greater than your actual shipping cost. The portion of the delivery charge that is greater than the actual delivery cost is taxable.
Please note: Your records must show your actual cost of delivery. The delivery charge should be separately stated on the invoice.
You make one combined charge for "shipping and handling" or "postage and handling." Handling portion of charge taxable; shipping portion may be taxable—see other criteria in this table.

Delivery–related charge is taxable when (for taxable sales only):
Condition of sale or type of delivery charge Notes and exceptions
You do not keep records that show the actual cost of the delivery. Many businesses charge standard amounts for shipping and do not track the cost of individual deliveries.
You deliver merchandise with your own vehicles. Exception: May not be taxable if title to merchandise transfers to buyer before delivery. This is unusual—contact the CDTFA.
You make a separately stated charge for fuel surcharge or "handling," etc. Separately stated charges, in addition to the actual shipping charges, are generally taxable. See above section on one charge for "shipping and handling."
You include a delivery charge in the unit price of the item sold. Sample invoice entry: "$6.50 per bale, including delivery."
Your charge to your customer represents the cost of shipping the merchandise to your place of business ("freight-in"). "Freight-in" is different from "freight-out." If you bill your customer for freight-in, the charge is taxable. Freight-out shipping may be taxable. See other criteria in this table.
You make a sale for a delivered price (sales agreement specifies that delivery is included in price, whether delivery charge is listed separately, included in per-item cost, or listed as "freight prepaid"). Exception: Delivery charges may not be taxable if title to merchandise transfers to buyer before delivery. This is unusual—contact the CDTFA for information.

Revision December 2017