Is freight taxable?
Freight and delivery charges, including postage and handling, associated with the purchase of taxable sales of intangible personal property are included in the basis of the tax when title to the property passes to the purchaser at the destination point (agency buyers place of business). When title passes at point of origin (sellers place of business), freight and delivery charges are not taxable. The agency can avoid incurring taxes on freight by always buying intangible personal property f.o.b. point of shipment/origin, which means title passes to the buyer when the goods are loaded for shipment. If an agency is forced to buy intangible personal property f.o.b. destination, the easiest and best way to do it is to have the vendor prepay the freight and include it in the unit price (option 1 above). The freight is encumbered when the PO line is created, and the tax calculation and proration will include the freight automatically in AP.
Freight can be set as Taxable, taxes determined by the customer, or taxes calculated based on a schedule. The tax schedule entered will be matched to the taX schedule listed for the customer or customer address record. If both schedules have matching details, taxes will be calculated for that detail. For example, if the freight tax schedule includes Florida as a detail and the customer schedule included the Florida detail, taxes will be calculated on the freight. However, if the freight schedule contains the detail Florida and not Georgia and the customers schedule includes the detail Georgia and not Florida, no freight tax will be calculated. We have a lengthy writeup on these calculations in our new ‘Understanding Sales Order Processing” manual. Visit our web site below. Richard L. Whaley Author / Consultant / MVP Documentation for Software Users Get our Free Tips and Tricks Newsletter and check out our books at http://www.AccoladePublications.
