Are Shipping and Handling Taxable in Nevada?

In Nevada, the taxability of shipping and handling charges depends on specific circumstances. The state’s regulations outline how these costs must be presented to the customer on an invoice to be considered non-taxable.

The General Rule for Taxing Transportation Charges

In Nevada, the taxation of transportation charges depends on how they are itemized on a customer’s invoice. Transportation, shipping, or postage charges are not subject to sales tax if they are for transportation alone and are separately stated on the invoice. If a business sells a taxable product and lists the actual shipping cost as a distinct line item, that charge is exempt from sales tax.

If the shipping charge is not stated separately and is included in the item’s total price, it becomes part of the gross receipts from the sale. The entire amount, including the embedded shipping cost, is then subject to sales tax. For example, if a taxable item costs $100 and the shipping is $10, listing a single price of $110 makes the full amount taxable. Listing the item for $100 and “Shipping” for $10 on separate lines means tax is only due on the $100.

The taxability of shipping is also tied to the taxability of the goods being sold. If the underlying product is exempt from sales tax, such as unprepared food or prescription medicine, any associated shipping charge is also exempt. This holds true regardless of whether the shipping charge is separately stated.

Defining Separately Stated Charges

The Nevada Department of Taxation distinguishes between pure transportation costs and other related fees. For a charge to be non-taxable, it must exclusively represent the cost of moving the property from the seller to the purchaser, such as transportation, shipping, or postage.

A line item for “Postage” or “Freight” from a common carrier is non-taxable, but a charge labeled “Shipping and Handling” is viewed differently. The inclusion of “handling” implies that the charge covers more than just the cost of transit.

Handling charges are taxable in Nevada because they relate to services that are part of the sale’s completion, such as the costs of crating, packing, order processing, or assembly. If an invoice has a single, combined line item for “Shipping and Handling” for $25, the entire $25 becomes taxable, even if the actual postage cost was only $15. To maintain the non-taxable status of the transportation portion, a business must list “Shipping” for $15 and “Handling” for $10 as separate line items, with tax applied only to the handling fee.

Application to Special Shipping Scenarios

The shipping tax rules also apply to transactions involving drop shippers. In a drop shipping scenario, a retailer takes an order from a Nevada customer but has a third-party supplier ship the product directly to that customer. The Nevada Department of Taxation encourages all parties in such arrangements to register with the Department to ensure compliance, as all parties may have tax obligations.

Required Documentation for Tax Compliance

To withstand an audit by the Nevada Department of Taxation, businesses must maintain records that justify their sales tax calculations. The customer invoice must clearly list the sales price of the property and the separate, non-taxable charge for transportation.

Businesses should also retain supporting documentation that substantiates the shipping charges, such as bills of lading, shipping receipts from common carriers like the U.S. Postal Service or FedEx, and freight invoices. These documents prove that the separately stated charge reflects the actual transportation cost and does not contain taxable fees like handling.

If handling or other services are charged, records must show these as separate, taxable line items. Without this specific proof, regulators may reclassify non-taxed shipping charges as taxable and assess back taxes, penalties, and interest.