Sales Tax Articles
Sales Tax State Activity Update - February 2008
Tennessee "Delivers" on SSTP Compliance
In order to comply with the Streamlined Sales and Use Tax Agreement., substantial changes have been made to the Tennessee sales tax statutes.
Effective January 1, 2008, the definition of "sales price" and "purchase price" has been amended to include delivery charges made by the seller for delivery of tangible personal property and services.
Delivery charges include charges for:
- Transportation
- Delivery
- Shipping
- Shipping and handling
- Incoming freight
- Outgoing freight
- Packing
- Crating
- Postage
Delivery charges that are billed by a seller of tangible personal property or services are part of the sales price or purchase price of the product, regardless of the shipping terms and regardless of whether the delivery charges are separately itemized on the invoice. Sales or use tax applies to the total sales price or purchase price of the product, including the delivery charges. This statutory change supersedes Sales and Use Tax Rule 1320-5-1-.71, which dealt with the treatment of freight charges.
Delivery charges are subject to sales and use tax if an item of tangible personal property or service is subject to Tennessee sales or use tax. The delivery charge made by the seller for delivering the property or service is subject to sales or use tax.
If an item of tangible personal property or service is not subject to Tennessee sales and use tax, then the delivery charge made by the seller for delivering the property or service is not subject to sales or use tax. Examples include: sales for resale; sales to nonprofits and governmental agencies; and sales shipped out of state.
If an item of tangible personal property or service is delivered by an independent third-party hired by the buyer and the delivery charges are made to the buyer, then delivery charges are not made by the seller and are not subject to sales or use tax.
Delivery charges may be allocated to combined shipments of taxable and non-taxable property or services using a percentage.
Itemized postage and mailing services for direct mailing printed material to a mass audience is not subject to sales tax
Charges for stand-alone shipping services provided by passenger or cargo transportation services are not taxable.
This notice can be viewed on the official Tennessee Government Website. (PDF)
(Notice #07-20, Delivery Charges, Tennessee Department of Revenue, 12/07)
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