Are Shipping Charges Taxable in Kentucky?

Sales tax is a consumer tax that businesses collect at the point of sale and remit to the state. Understanding how shipping charges are treated for sales tax purposes is important.

Taxable Sales in Kentucky

Kentucky sales tax is imposed at a uniform rate of 6 percent on the retail sale of tangible personal property and certain services. Unlike some other states, Kentucky does not have additional local sales taxes, meaning the statewide rate applies consistently across all counties. This tax generally applies to physical goods purchased for storage, use, or consumption within the state.

While the primary focus of sales tax in Kentucky is on tangible personal property, some specific services are also subject to the tax. For instance, certain repair and installation labor became taxable with changes to Kentucky’s tax code. Additional charges like shipping require specific consideration.

Sales Tax Treatment of Shipping Charges

In Kentucky, the taxability of shipping charges is directly tied to the taxability of the item being shipped. If the product sold is subject to Kentucky sales tax, then any associated charges for shipping, handling, or delivery are also generally taxable. This rule applies even if these charges are separately itemized on the invoice provided to the customer.

Conversely, if the item being shipped is exempt from Kentucky sales tax, then the related shipping charges are also exempt. For example, if a business ships non-taxable food items, the delivery charge for those items would also be exempt. This principle aligns the tax treatment of shipping with the underlying goods.

Kentucky’s Department of Revenue clarifies that delivery charges made by the retailer for delivery to a purchaser-designated location are included in the sale price. This applies regardless of whether the delivery is performed by the seller directly or by a third-party common carrier. When a seller charges a single fee for both shipping and handling, this combined charge is taxable if the underlying product is taxable.

Specific Scenarios for Shipping Charges

When an invoice includes both taxable and non-taxable items, and a single delivery charge covers the transaction, the entire delivery charge is taxable in Kentucky. There is no provision in the state’s sales price definition that allows for excluding a portion of a bundled delivery charge for non-taxable items.

Maintaining clear invoicing and detailed record-keeping is beneficial for businesses. Although separately stating shipping charges does not alter their taxability in Kentucky for taxable goods, it helps in demonstrating compliance during audits. Such documentation provides transparency regarding how charges are applied and taxed.

Even when shipping costs are included within the overall price of goods rather than itemized separately, the taxability rule remains consistent. The underlying principle in Kentucky is that if the item itself is taxable, then the entire amount charged, including any embedded shipping costs, is subject to the 6 percent sales tax.