Sales Tax State Activity Update - August 2004

Transportation Charges Exempt in Massachusetts

The Massachusetts Department of Revenue (MDOR) has issued a directive 04-05 stating that effective September 1, 2004, no sales tax is assessed on separately stated transportation and delivery charges. This directive revokes MDOR Directive 96-5 in its entirety, and replaces it with the following rules:

• A transportation charge, i.e., a charge by the seller of tangible personal property for preparation and delivery of goods to a location designated by the purchaser is excluded from the sales price subject to tax.
• Charges for transporting property to the vendor as “freight-in” charges are not “transportation charges” within the meaning of this Directive.
• Freight-in charges are part of the vendor’s overhead and are included in the sales price subject to tax.
• Separately stated charges may include amounts paid for “postage,” “freight,” “shipping,” “handling,” “transportation,” “shipping and handling,” crating, packing or the like, so long as the charges reflect a cost of preparing and delivering the goods from the retail vendor to a location designated by a retail customer. If so, the charges may be excluded from the sales price subject to tax.
• A transportation charge must be reasonable. The charge is considered reasonable if it reflects, more or less, the actual shipping and handling costs incurred in making a delivery. However a lump sum shipping and handling charge that contains a substantial profit component is not reasonable.

The Directive is available at : http://www.dor.state.ma.us/rul_reg/dir/DD_04_5.htm

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