Are Freight Charges Taxable in Louisiana?

Understanding the tax implications of freight charges in Louisiana is important for businesses and individuals. Sales and use tax applies to many transactions within the state, and the charges associated with shipping goods are often connected to these taxes. Navigating these rules helps ensure compliance and accurate financial record-keeping for those involved in commerce in Louisiana.

General Rules for Freight Taxability

Freight or delivery charges associated with the sale of taxable tangible personal property are generally subject to Louisiana sales and use tax. This applies even if these charges are listed separately on an invoice. The taxability of the freight charge typically follows the taxability of the item being shipped; if the goods being transported are taxable, then the delivery charge for those goods will also be taxable.

“Freight” or “delivery charges” for tax purposes in Louisiana broadly include shipping, handling, postage, and other transportation costs incurred to deliver the goods to the customer. These charges are considered part of the “sales price” or “cost price” of the tangible personal property being sold. This inclusion in the sales price is why they are subject to sales tax.

Louisiana’s approach treats transportation charges as an integral component of the sale of taxable goods. Therefore, regardless of whether the charges are itemized or bundled with the product price, they are typically taxable if the item itself is taxable. This rule applies to both state and local sales taxes within Louisiana, as local jurisdictions generally adopt the state’s definitions.

Specific Scenarios and Exemptions

While the general rule is that freight charges on taxable goods are taxable, some situations exempt them from Louisiana sales tax. If the underlying goods are non-taxable or exempt from sales tax, then the associated freight charges are also not taxable. This principle extends to items purchased for resale by a merchant who holds a valid resale certificate, making the related freight charges also exempt.

Separately stated shipping and delivery charges are generally exempt from state sales tax if the buyer has the option to avoid the charge, such as by picking up the goods themselves. However, if the freight charges are included in the overall sales price and cannot be avoided, they are typically taxable.

Freight charges related to services, rather than tangible goods, generally follow the taxability of the service itself. In Louisiana, services are largely not subject to sales tax, with specific exceptions. If a service is not taxable, then any freight charges for delivering components or results of that service would also not be taxable. For instance, transportation as a standalone service is generally not taxable.

Transportation charges associated with the delivery of leased or rented property are not subject to sales and use tax, provided these charges are separately stated. This is because transportation costs are not considered part of the gross proceeds derived from a lease or rental.

Interstate vs. Intrastate Considerations

The distinction between intrastate and interstate shipments is important when determining the taxability of freight charges in Louisiana. Intrastate freight refers to shipments where both the origin and the destination of the goods are entirely within Louisiana. For these shipments, if the goods being transported are taxable, the freight charges will generally be subject to Louisiana sales tax.

Interstate freight, conversely, involves shipments that cross state lines. Typically, delivery charges for interstate shipments are not subject to Louisiana sales tax when the delivery is made by a common carrier and the charges are separately stated.

The origin and destination of the shipment are crucial for determining which state has the taxing jurisdiction. Louisiana is a destination-based sales tax state, meaning the sales tax rate applied is generally based on the buyer’s location. For interstate freight, if the sale is for out-of-state delivery, Louisiana generally does not levy sales tax on the freight component.