Is Freight Taxable in PA? A Review of State Rules
Navigate Pennsylvania's sales tax regulations concerning freight. Understand taxability conditions, key exemptions, and essential invoicing guidelines.
Pennsylvania levies a sales tax on the retail sale, consumption, rental, or use of tangible personal property within the state. This tax also applies to specific services related to such property and certain business services. The statewide sales tax rate is 6 percent, though some counties impose additional local sales taxes, such as Allegheny County with an additional 1 percent and Philadelphia with an additional 2 percent, leading to combined rates of up to 8 percent. Businesses selling taxable goods or services in Pennsylvania are responsible for collecting this tax from purchasers and remitting it to the state.
Understanding Freight Taxability in Pennsylvania
Freight or delivery charges in Pennsylvania are part of the sales price of an item and are subject to sales tax when associated with the sale of taxable tangible personal property. This applies even if the delivery charges are separately itemized on the invoice. The Pennsylvania Department of Revenue considers these charges taxable because delivery is an integral part of completing the sale of taxable goods. This principle aligns with Pennsylvania’s sales and use tax regulations, specifically 61 Pa. Code § 31.41.
Conditions for Taxable and Non-Taxable Freight
The taxability of freight charges in Pennsylvania depends on the nature of items shipped and delivery circumstances. If a shipment contains only taxable tangible personal property, the freight charges for that entire shipment are taxable. This holds true regardless of whether the charges are combined with the product price or listed separately. Similarly, if a shipment includes both taxable and non-taxable items, the entire freight charge is taxable.
However, freight charges are not subject to sales tax in specific situations. Delivery charges for items exempt from sales tax, such as certain food products, clothing, or pharmaceutical drugs, are not taxable. Additionally, if a third-party common carrier makes and bills the delivery directly to the buyer, the freight charge is exempt. This occurs when the seller acts as an agent in arranging shipping, and title and risk of loss for the goods transfer to the buyer before shipment. Freight charges for items delivered to locations outside of Pennsylvania are also not subject to Pennsylvania sales tax.
Proper Invoicing for Freight Charges
Businesses must manage how freight charges are presented on invoices to ensure compliance with Pennsylvania sales tax laws. Freight charges should be clearly itemized, even when taxable, to provide transparency to the customer. When freight charges are taxable, sales tax should be calculated and applied to these charges just as it would be for the taxable goods themselves. This means the freight charge is added to the total taxable amount before applying the sales tax rate.
Maintaining records is important for businesses collecting sales tax on freight. These records should include sales invoices detailing transportation charges, shipping instructions, freight invoices, and parcel post receipts or shipment records. Proper documentation helps a business demonstrate compliance during audits and accurately report collected sales tax to the Pennsylvania Department of Revenue.