Were postage charges taxable when a retailer mailed a taxable item and billed the customer for mailing?

Plain-English summary

When a retailer sold a taxable item, mailed it, and billed the customer for mailing, tax applied to the total price including the postage paid to the retailer. The result did not depend on whether the fulfillment house was in Texas or out of state.

The seller—not the fulfillment house—was responsible for collecting the tax. A Texas purchaser could not avoid tax on the postage component by buying from outside Texas.

Postage by itself was not taxable when the mailed item was not sold or was not taxable when sold.

What this means for you

The historical distinction followed the underlying transaction. A mailing charge included in a taxable retail sale entered the taxable total, while standalone postage tied to no sale or a nontaxable item did not.

Common questions

Was postage billed with a taxable item taxable? Yes, as part of the total price.

Did an out-of-state fulfillment house change the answer? No.

Who collected the tax? The seller.

Was postage always taxable? No. Standalone postage for an unsold or nontaxable item was not taxable.

Citations and references

• No statute or rule number is cited in the ruling text.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8709L0842E13

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TX 78774

September 28, 1987

Dear *:

Thank you for giving me the opportunity to further explain and clarify
our
telephone conversation pertaining to taxes on postage.

When a retailer sells a taxable item and ships the item by mail and bills
the
customer for the cost of mailing the item, the customer will have to pay
tax
on the total price, including mailing costs paid to the retailer. Under
these
circumstances, it will not matter whether the fulfillment house is out of
state
or in Texas. It is the seller, and not the fulfillment house, who will
have to
collect the tax.

Texas purchasers will not avoid tax liability on postage charges by
buying
out-of-state. If the seller charges for the postage, Texas tax will be
due on
the total price paid to the seller, including postage.

You are correct in your understanding that postage charges by themselves
are not taxable, as in mailing of an item which is either not sold or not
taxable when sold.

You may reassure your constituents that all Texas and out-of-state
retailers
who are required to collect tax will collect the tax on any postage
charges,
whether or not Texas fulfillment houses are used.

We encourage you or your constituents to call us on our toll-free line
1-800-252-5555 if they have further questions on the new laws.

Respectfully yours,
Wanda Hutcheson
Manager, Sales Tax Policy