When were freight or delivery charges excluded from the taxable price of tangible personal property, and when were they taxable seller overhead?

Plain-English summary

Optional and separately stated transportation from the completed place of sale to the buyer's chosen destination was excluded from tax. Freight that brought goods to the place of sale was taxable seller overhead.

Mandatory delivery or a delivery charge absorbed into the property price was also taxable.

Delivery after the place of sale

A seller could exclude the actual separately stated transportation charge whether delivery used the seller's vehicle, a common carrier, or a contract carrier.

The buyer had to be able to avoid the charge by picking up the goods or arranging its own carrier or agent. If the seller did not permit avoidance, transportation was an inseparable part of the taxable price.

If delivery was not separately stated, tax applied to the entire sales or cost price.

Freight to the place of sale

Transportation incurred for the seller's account to bring special-order or other goods to the seller's location—or directly to the seller's customer while the seller remained responsible—was seller overhead.

Separately passing that inbound expense to the customer did not remove it from the taxable price.

Common questions

Q: Was a separately stated delivery charge always exempt?

A: No. It also had to be optional and avoidable.

Q: Did using a common carrier control the result?

A: No. The place and role of the transportation mattered.

Q: Could inbound freight be excluded by listing it separately?

A: No.

Citations and references

• La. R.S. 47:301(3)(a) and 47:301(13)(a) — cost-price and sales-price definitions
• Chicago Bridge & Iron Co. v. Cocreham, 317 So. 2d 605 (La. 1975)
• Pensacola Construction Co. v. McNamara, 558 So. 2d 231 (La. 1990)
• LAC 61:III.101.C — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 01-007

Original ruling text

Revenue Ruling
No. 01- 007
October 10, 2001
Sales and Use Tax
Statement of the Department’s Position Regarding the Sales Taxability of
Charges for Transportation Associated with Sales of Tangible Personal Property
Transportation, delivery, and freight are frequently charged as separate line items on dealer
invoices for the sale of tangible personal property. For that reason, the department often receives
inquiries as to whether these charges are properly includible in the measure of the taxable “sales
price” or “cost price” on which the sales or use tax is to be collected.
The purpose of this Revenue Ruling is to discuss the taxability of:
•

Charges invoiced by sellers for the transportation of tangible personal property from the
places of sale to the destinations designated by purchasers, when the transportation is
provided by seller vehicles, common carriers, or contract carriers; and

•

Charges passed through by sellers to their customers for the overhead expenses that the
sellers incur in having tangible personal property transported for the sellers’ accounts to the
places from where they sell the property.

The sales and use tax statutes that govern this taxation are the definition of the term “cost price”
at Louisiana Revised Statute Title 47, Section 301(3)(a), that forms the basis for the imposition
of the use tax and the definition of the term “sales price” at La. R.S. 47:301(13)(a), that forms the
basis for the imposition of the sales tax.
La. R.S. 47:301(3) defines the term “cost price”, in pertinent part, to mean “the actual cost of the
article of tangible personal property without any deductions therefrom on account of the cost of
materials used, labor, or service cost . . . transportation charges, or any other expenses
whatsoever…”. La. R.S. 47:301(13)(a) similarly defines “sales price”, in pertinent part, to mean
“the total amount for which tangible personal property is sold, … including any services, that are
a part of the sale valued in money, whether paid in money or otherwise, and includes the cost of
materials used, labor or service costs …”.
Transportation from Place of Sale to Purchaser’s Designated Location

The state sales or use tax is not collectible on the separately invoiced charge by the seller for the
transportation of the tangible personal property that he has sold from the place of sale to the
destination designated by the buyer. This position comports with the decisions of the Supreme
Court of Louisiana in Chicago Bridge & Iron Company v. Cocreham, 317 So.2d 605 (La. 1975)
and Pensacola Construction Company v. McNamara, 558 So.2d 231 (La. 1990). In the typical
scenario, a seller will sell property at his store, warehouse, or loading dock for a stated or agreed
“sales price”. To the buyer who desires delivery, a charge in addition to the stated or agreed

A Revenue Ruling is written to provide guidance to the public and to Department of Revenue
employees. It is issued under Section 61:III.101(C) of the Louisiana Administrative Code to apply
principles of law to a specific set of facts. A Revenue Ruling does not have the force and effect of
law and is not binding on the public. It is a statement of the department's position and is binding
on the department until superseded or modified by a subsequent change in statute, regulation,
declaratory ruling, or court decision.

Revenue Ruling No. 01 – 007
Page 2 of 2

“sales price” is made for the transportation of the property from the store, warehouse, or loading
dock where the property was sold to the destination designated by that buyer. The actual
separately stated charge for transportation from the place of sale, whether by the seller’s own
vehicles or by contract or common carrier, is not subject to the sales tax. On transactions where
delivery or transportation of tangible personal property is provided, but the price of
transportation or delivery is absorbed within the “sales price” or “cost price” of the property and
not separately stated, the sales or use tax must be collected and remitted on the entire “sales
price” or “cost price” of the property.
Charges by a seller for transportation from the place of sale are excludible, under the conditions
explained above, from the taxable “sales price” or “cost price” of the property only if the charges
are optional and are avoidable by the buyer through such means as the buyer calling for and
picking up the property himself at the place of sale, or by having his own carrier or agent pickup
the property at the seller’s location and transporting the property for the buyer’s account. If the
seller will not allow the transportation charges to be avoided by these or other means, the
transportation charges will be considered as an inseparable component of the taxable “sales
price” or “cost price” of the tangible personal property that he sells.
Transportation to the Place of Sale

Sellers and purchasers sometimes agree to the sale and purchase of tangible personal property
that the sellers do not have in their inventories available for over-the-counter delivery or
immediate shipment. Often, in these cases, the retail selling dealer will place a special order
with a wholesale supplier, asking that the wholesale supplier ship the ordered merchandise, for
the retail seller’s account, either to the retail seller’s location or directly to the retail seller’s
customer’s location. In most cases, the retail seller is responsible to the customer for the actions
of the wholesale dealer and of any public carrier in providing safe delivery of the tangible
personal property to the retail seller’s location or to the customer’s designated place of delivery,
and for any damage or losses while the property is in transit. The cost to transport tangible
personal property to the place where it is to be sold is an overhead expense of the seller. If the
seller chooses to separately state within the price to his customer the amount of expense that the
seller incurred in transporting the property to the place of sale, that amount cannot be excluded
from the taxable “sales price” or “cost price” of the property to the customer. In such a case, the
transportation is a service that is includible within the statutory definitions of both “sales price”
and “cost price”, as explained above.
Cynthia Bridges
Secretary
By:

Raymond E. Tangney
Senior Policy Consultant
Policy Services Division