Sales tax on shipping charges: how states differ

Shipping charges are one of the most common sales tax errors for online stores, because states treat them differently and store settings use a single rule. This guide explains the main approaches and how to set up your store.

By Muhammad Bilal, Chartered Accountant. Reviewed by Awais Jameel, Chartered Accountant. Checked against official sources on . 3 minute read.

Short answer

Sales tax on shipping depends on the state. Some, such as Texas, New York and Washington, generally tax shipping on taxable items. Others, such as California, exempt it if separately stated and no more than the actual cost of delivery by common carrier. Handling fees are taxable in most states. On mixed orders, shipping is often taxed in proportion to the taxable items.

At a glance

Taxed with taxable items
Texas, New York, Washington and others
Exempt if separately stated
California, if actual cost by common carrier
Handling fees
Usually taxable
Mixed orders
Often taxed in proportion
Exempt items
Shipping usually follows the item
Free shipping
No separate charge to tax
Sales tax on shipping charges: how states differTaxed with taxable items: Texas, New York, Washington and others; Exempt if separately stated: California, if actual cost by common carrier; Handling fees: Usually taxable; Mixed orders: Often taxed in proportion; Exempt items: Shipping usually follows the item; Free shipping: No separate charge to tax.KEY FACTS AT A GLANCESales tax on shipping charges: how states differTaxed with taxable itemsTexas, New York,Washington and othersExempt if separately statedCalifornia, if actualcost by common carrierHandling feesUsually taxableMixed ordersOften taxed in proportionExempt itemsShipping usually followsthe itemFree shippingNo separate charge to taxChecked against official sourcesTax BakersSales tax on shipping charges: how states differTaxed with taxable items: Texas, New York, Washington and others; Exempt if separately stated: California, if actual cost by common carrier; Handling fees: Usually taxable; Mixed orders: Often taxed in proportion; Exempt items: Shipping usually follows the item; Free shipping: No separate charge to tax.KEY FACTS AT A GLANCESales tax on shipping charges: howstates differTaxed with taxable itemsTexas, New York, Washington and othersExempt if separately statedCalifornia, if actual cost by common carrierHandling feesUsually taxableMixed ordersOften taxed in proportionExempt itemsShipping usually follows the itemFree shippingNo separate charge to taxChecked against official sourcesTax Bakers
Key facts at a glance, as set out in this guide.

How do states treat shipping?

ApproachExamples
Shipping on taxable items is taxableTexas, New York, Washington, Pennsylvania, Georgia
Exempt if separately stated and meets conditionsCalifornia: separately stated, by common carrier, not over actual cost
Other statesTheir own rules, often depending on how the charge is stated and who delivers

Check each state where you collect; rules and conditions differ in detail.

Shipping on exempt items, such as most groceries or prescription medicine, generally follows the item and is exempt.

Charges for delivery by the seller's own vehicles, rather than a common carrier, can be treated differently from postal or courier delivery in some states.

What about handling fees?

Handling charges for packing and processing are taxable in most states, even in some that exempt pure delivery charges. A combined "shipping and handling" charge may be taxed in full where handling is taxable. Separate them on the invoice if delivery is exempt in your state.

Insurance charged to the customer for shipping is treated differently from delivery in some states, so list it separately too.

Gift wrapping and similar charges are usually taxable as part of the sale.

How are mixed orders handled?

When an order includes taxable and exempt items, many states tax the shipping in proportion to the taxable items, by price or by weight. A $10 shipping charge on an order that is 60% taxable by price may carry tax on $6.

Some states let you choose between allocating by price and by weight, as long as you use the same method consistently and keep records showing the calculation.

How should you set up your store?

  1. List the states where you collect

    From your registrations.

  2. Check each state's shipping rule

    Taxable, conditionally exempt, or other.

  3. Configure your store's tax settings

    Most platforms let you set shipping taxability by state.

  4. State charges clearly

    Separate shipping from handling on invoices and receipts.

See Shopify sales tax setup.

Review the settings whenever you register in a new state, change carriers or add handling charges, because a store setting chosen once is easy to forget.

Marketplace sales follow the marketplace's settings, not yours.

What does an example look like?

An order of $80 of clothing and $20 of exempt food, with a $10 shipping charge, goes to a state that taxes shipping in proportion to taxable items. The taxable share is 80%, so $8 of the shipping is taxable along with the $80 of clothing. In a state that exempts separately stated shipping, only the $80 would be taxed, provided the charge meets the state's conditions.

What about drop shipments?

When a supplier ships directly to your customer, the supplier may charge you sales tax on its sale to you unless you give it a resale certificate valid in the delivery state, and you then charge your customer, including on shipping where taxable. See resale certificates.

What are the common mistakes?

  • Using one shipping setting for every state.
  • Combining shipping and handling into one charge in states that exempt delivery.
  • Charging more for shipping than the actual cost in states that exempt only actual cost.
  • Forgetting that shipping on exempt items is usually exempt too.

What about free shipping?

If shipping is built into the product price, there is no separate charge, and the full price is taxed as the sale price of the item. Marketplaces apply each state's rules to their own sales automatically. See marketplace facilitator laws.

A minimum order for free shipping does not change this.

Return shipping you pay for is a business cost, not part of a sale.

Not sure if your shipping is taxable?

We check the shipping rules in each state where you collect, fix your store's tax settings and file your returns.

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Questions people ask

Is shipping taxable?

It depends on the state. Some tax shipping on taxable items; others exempt it if separately stated and meeting conditions.

Is shipping taxable in California?

Not if separately stated, delivered by common carrier and not more than the actual cost.

Are handling fees taxable?

In most states, yes, even where delivery charges are exempt.

How is shipping taxed on mixed orders?

Often in proportion to the taxable items in the order.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. California CDTFA: Publication 100, Shipping and Delivery Charges
  2. Texas Comptroller: Remote Sellers
  3. Streamlined Sales Tax Governing Board: delivery charges definition

Rules and fees change. If you are reading this long after October 1, 2026, confirm the figures with the source before you rely on them.

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This guide is general information. It is not tax or legal advice for your situation.