Earlier this week, the Missouri Department of Revenue mailed nearly 100,000 letters to taxpayers regarding delivery charges.
The letters were mailed to notify taxpayers of a Missouri Supreme Court decision regarding the potential obligation to remit tax on delivery charges. Prior to the court ruling Missouri allowed separately stated shipping/delivery fees to be exempt from the tax base. Going forward, if delivery is intended to be a part of the sale of product (tangible personal property), the charge is subject to Missouri sales tax even when separately stated.
There are a number of factors to determine whether delivery is intended to be part of the sale. The factors include:
- When title passes from the seller to the purchaser.
- Whether the delivery charges are separately stated.
- Who controls the cost and means of delivery.
- Who assumes the risk of loss during delivery.
- Whether the seller derives financial benefit from delivery.
It is important to note the taxability of the delivery fee will follow the taxability of the product or tangible personal property being sold. If the product is taxable, the delivery will most likely be subject to sales tax. If the product is nontaxable because of an exemption certificate or an export sale, the delivery will not be subject to sales tax.
- Taxable Transaction: When a customer purchases a new refrigerator that includes delivery for an additional fee. The delivery fee may now need to be included in the tax base, depending on the factors mentioned above.
- Nontaxable Transaction: When a customer purchases an item for resale that includes delivery for an additional fee. The delivery fee would not need to be included in the tax base if the customer has provided an exemption certificate.
- Nontaxable Transaction: If an individual is shipping something to a relative via FedEx/UPS, tax would not be calculated on the shipping/delivery fee, as this would be deemed a nontaxable service.
If delivery charges in Missouri or other states raise concerns or uncertainties the State and Local Tax (SALT) professionals at RubinBrown can assist you in resolving those concerns.
Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.
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