ARE FREIGHT CHARGES TAXABLE?
Freight charges are taxable unless the shipping is billed F.O.B. point of origin. 2. If Company A (located in California) makes a sale to Company B (located in New Jersey) but ships the merchandise to Company C (located in South Carolina); who is responsible for the South Carolina Tax? This is a third party drop shipment scenario. Company A is considered to be making a nontaxable sale for resale to Company B. Company C is liable for the South Carolina use tax unless it has a receipt (invoice) showing payment of the South Carolina tax to Company B.
All freight, shipping, or transportation charges are part of the gross receipts or invoice total on which sales and use tax must be collected and remitted by the seller if the products being shipped are subject to sales and use tax. If freight charges are billed directly to the purchaser by a common carrier, they will not be subject to sales and use tax. If the products being shipped are non-taxable, then the freight charges for shipping those non-taxable goods is not subject to sales and use tax.
According to Rule 810-6-1-.178, if delivery is made in the sellers own vehicle, or in equipment leased by him, the transportation charges are subject to sales or use tax. If delivery is made by common carrier or the U.S. Postal Service, the transportation charges shall not be subject to sales or use tax if billed as a separate item and paid directly or indirectly by the purchaser. To be excluded from the measure of tax, these transportation charges must be separate and identifiable from other charges.
