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.