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Avalara Help Center

How should we choose a freight shipping tax code?

Overview

You want to know if you should use a tax code that includes shipping and handling or just shipping for your freight items when choosing an Avalara tax code.

Environment

Avalara AvaTax

Resolution

  • We recommend that you review what is provided in your shipping charge and choose a tax code that fits, consider:
    • How is the product sent (common carrier? company vehicle delivery? electronically? etc.)
    • When does the ownership of the product change hands?
      • FOB Origin - sale is considered complete when you ship
      • FOB Destination - sale is complete at the buyer's doorstep
    • Are handling fees or other fees included in the charge?
  • Choose a tax code that fits your shipping charge description matching what you actually provide for the fee

Note: We recommend that you list the shipping fee on your invoices with a description matching what is actually provided. Example: If you charge for shipping only and use a shipping only tax code (such as FR), but your invoices list "Shipping & Handling" as the freight description, this could cause issues during an audit. We recommend that the description and tax code used match what is actually provided.

Next steps

For more information about Avalara tax code, see Select Avalara Tax Codes.