Tax Type
Retail Sales and Use Tax
Description
Shipping and handling charges
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
09-23-1991
September 23, 1991
Re: Request for Ruling: Retail Sales and Use Tax
Dear*****************
This will reply to your letter of August 23, 1991 in which you request a ruling on the application of the sales and use tax to separately stated transportation charges.
FACTS
*************(the Taxpayer) is a franchiser of carpet cleaning businesses. The Taxpayer sells and ships different parts and supplies to its franchises. The Taxpayer pays the carrier for the transportation at the time of pick-up and then bills the franchisee for the materials and shipping on the C.O.D. packing slip, separately stating the transportation charge on the invoice.
The Taxpayer requests a ruling regarding Virginia's tax treatment of shipping and handling charges.
RULING
Virginia sales tax is computed on the "sales price" of an item. Va. Code §58.1-602 defines "sales price" as the "total amount for which tangible personal property or services are sold, including any services that are a part of the sale, [but] excluding transportation charges separately stated."
Additionally, Virginia Regulation (VR) 630-10-107 (copy enclosed) defines "transportation charges" as charges for delivery from the seller to the purchaser, commonly known as "transportation-out." Transportation charges do not include charges from a manufacturer to a retailer's place of business relative to purchases for resale, commonly known as "transportation in," nor do they include handling charges.
Therefore, separately stated shipping or transportation charges for delivery of goods from the seller are exempt from the tax. However, when a seller does not segregate nontaxable transportation charges from taxable handling charges, but instead combines the two into a single charge, the combined "shipping and handling" charge is taxable, even if separately stated.
I hope this responds to your questions, but let the department know if you need any further information.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner