Are a retailer's freight and shipping charges taxable in Kansas when the item sold is taxable?

Plain-English summary

A printing company that "produce[s] payment remittances for financial institutions" asked whether "postage or shipping charges by common carrier are taxable or non-taxable," including when the charges are "separately stated on the invoice."

The three statutes. The Department identified "[t]hree Kansas statutes [that] address the area of the taxation of freight charges":

• K.S.A. 79-3603(a) imposes the sales tax "upon the gross receipts received from the sale of tangible personal property at retail within this state."
• K.S.A. 79-3602(h) defines "gross receipts" as "the total selling price or the amount received . . . in money, credits, property or other consideration valued in money from sales at retail within this state."
• K.S.A. 79-3602(g) defines "selling price" as "the total cost to the consumer exclusive of discounts allowed and credited, but including freight and transportation charges from the retailer to the consumer."

The holding. "Based on the statutory provisions noted above, if the item being sold is subject to tax, shipping and freight charges imposed by the retailer are also subject to tax. This is true whether the freight charge is included in the total product price on the purchase order or separately stated."

Bottom line: freight and transportation charges from the retailer to the consumer are part of the taxable "selling price," so when the item sold is taxable, its shipping charges are taxable too — and separately itemizing them on the invoice does not change that result.

What this means for you

Freight follows the item

If the product you are selling is taxable, the freight or shipping you charge the customer to get it to them is taxable as well. It is part of the "selling price" and therefore of the taxable "gross receipts."

Separately stating shipping does not exempt it

A common misconception is that breaking out shipping on a separate line makes it non-taxable. In Kansas it does not — the tax applies "whether the freight charge is included in the total product price . . . or separately stated."

The item's taxability controls

The rule keys off whether "the item being sold is subject to tax." If the underlying goods are themselves exempt, the analysis differs; but where the goods are taxable, the retailer's freight-to-the-consumer charges ride along as taxable.

Common questions

Q: Are shipping and freight charges taxable in Kansas?
A: Yes, when the item sold is taxable. "[I]f the item being sold is subject to tax, shipping and freight charges imposed by the retailer are also subject to tax."

Q: Does it help to list the shipping charge separately on the invoice?
A: No. The tax applies "whether the freight charge is included in the total product price on the purchase order or separately stated."

Q: Why are freight charges part of the taxable amount?
A: Because K.S.A. 79-3602(g) defines the taxable "selling price" to include "freight and transportation charges from the retailer to the consumer," which are then part of the "gross receipts" taxed under K.S.A. 79-3603(a).

Citations and references

• K.S.A. 79-3603(a) — imposes Kansas sales tax on the gross receipts from retail sales of tangible personal property.
• K.S.A. 79-3602(h) — defines "gross receipts" as the total selling price or amount received from retail sales.
• K.S.A. 79-3602(g) — defines "selling price" to include "freight and transportation charges from the retailer to the consumer," bringing freight into the taxable base.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-167

Original ruling text

Private Letter Ruling

Body:

Office of Policy and Research

July 28, 1999

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

Re: Kansas Sales Tax

Dear XXXXX:

Your correspondence of June 25, 1999, has been referred to me for response. Thank you for your inquiry.

Your letter indicates your company is in the printing business, and that you produce payment remittances for financial institutions. In order to update your records, you ask for a copy of the Kansas statutes which control whether postage or shipping charges by common carrier are taxable or non-taxable if: (A) the product is shipped by common carrier to the purchaser or (B) shipped to a third party by the U.S. Post Office at the request of the purchaser. You ask whether freight / mail charges are part of the purchase price if the charges are separately stated on the invoice.

Three Kansas statutes address the area of the taxation of freight charges. K.S.A. 79-3603(a) imposes a sales tax: "upon the gross receipts received from the sale of tangible personal property at retail within this state."

K.S.A. 79-3602(h) provides, in pertinent part, that: “’Gross receipts’ means the total selling price or the amount received as defined in the [Kansas Retailers' Sales Tax Act], in money, credits, property or other consideration valued in money from sales at retail within this state; . . .”

K.S.A. 79-3602(g) provides: “’Selling price’ means the total cost to the consumer exclusive of discounts allowed and credited, but including freight and transportation charges from the retailer to the consumer.”

Based on the statutory provisions noted above, if the item being sold is subject to tax, shipping and freight charges imposed by the retailer are also subject to tax. This is true whether the freight charge is included in the total product price on the purchase order or separately stated.

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

I trust this information is of assistance. If I can be of further service, please feel free to contact me.

Sincerely,

Jim Weisgerber
Attorney
Tax Specialist

JW:jw

Date Composed: 08/04/1999 Date Modified: 10/11/2001

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