Questions and Answers

Identifying Information:Shipping charges
Tax Type:Kansas Retailers' Sales Tax
Brief Description:Treatment of shipping charges when a shipment includes both taxable and nontaxable goods.
Keywords:
Approval Date:12/10/2004



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QUESTION: How are shipping charges taxed when a shipment contains both taxable and non-taxable goods?

ANSWER: Kansas levies sales tax on the "sales or selling price" of goods, which means the amount charged for the goods sold plus any shipping charge for delivering the goods from the seller to the buyer. See K.S.A. 2003 Supp. 79-3603(ll). When a single shipment contains both taxable and non-taxable goods, the seller should collect tax on the percentage of the shipping charge allocated to taxable goods. Shipping charges include postage, Fed Ex and UPS charges and similar charges.

To allocate a shipping charge between taxable and non-taxable goods, the seller may either: (1) divide the amount charged for the taxable goods by the total amount charged for all of the goods being shipped; or (2) divide the weight of the taxable goods by the total weight of the shipment. The seller then should multiply the percentage that results from (1) or (2) times the total shipping charge to determine the taxable amount of the shipping charge.

EXAMPLE: A shipment of goods that costs $800 contains $600 worth of taxable goods and $200 worth of nontaxable goods. The total shipping charge is $60. To determine the taxable percentage of the shipping charge, $600 (the amount charged for taxable goods) is divided by $800 (the total amount charged for all goods). $600 divided by $800 equals 75%. 75% of $60 (the total shipping charge) is $40. Adding the taxable shipping charge to the cost of the taxable goods means the seller should collect state and local tax on a total of $640 for the taxable goods and their shipment to the customer.

EXAMPLE: A shipment of goods weighs 12 pounds. The shipment consists of 3 pounds of taxable goods and 9 pounds of items not being taxed. The total shipping charge is $80. To determine the taxable percentage of the shipping charge, 3 pounds (the shipping weight of the taxable goods) is divided by 12 pounds (the total weight of the shipment). 3 lbs. divided by 12 lbs. equals 25%. 25% of $80 (the total shipping charge) is $20. When the seller figures the tax due on the sale of the taxable goods, the seller should add $20 to the charges for the goods as the shipping charge being allocated to the taxable goods.

A seller's invoice must contain all of the information needed to calculate the allocation of the shipping charges that was made by the seller.



Date Composed: 12/16/2004 Date Modified: 12/16/2004