Is a separately itemized crating charge on an invoice for taxable goods subject to New York sales tax?

Plain-English summary

A supplier of terrazzo flooring and natural stone countertop materials (themselves taxable) builds crates to pack and ship the materials and lists a separate "crating charge" on its invoices. It asked whether that charge is taxable.

The Office of Counsel said yes. A vendor's taxable "receipt" includes "any charges by the vendor to the purchaser for shipping or delivery" (Tax Law § 1101(b)(3)), and the Department's regulations confirm delivery charges are taxable whether or not separately stated (20 NYCRR 526.5(g)). "Shipping" and "delivery" also include handling and similar charges (TB-ST-838). Building a crate and packing the materials for transport is handling in connection with delivery, so when the goods are taxable and delivered in New York (sales tax being a destination tax), the crating charge is part of the total taxable receipt — separate line item or not.

What this means for you

Suppliers, distributors, and anyone billing shipping/handling

When the product is taxable, your shipping, delivery, handling, crating, and packing charges are taxable too — separating them on the invoice doesn't make them tax-free. (Conversely, delivery charges on a sale of exempt goods generally follow the exempt treatment.)

Buyers

Expect tax on crating/handling line items when the underlying purchase is taxable and delivered in New York.

Accountants and tax professionals

Apply § 1101(b)(3) and 20 NYCRR 526.5(g): delivery/handling charges are in the receipt regardless of separate statement; crating is handling (TB-ST-838); destination rate per 525.2(a)(3).

Common questions

Q: If I list crating separately, is it tax-free?
A: No. Separately stating it doesn't matter — it's part of the taxable receipt when the goods are taxable.

Q: Why is crating treated like shipping?
A: Crating is a handling charge connected to delivery, and the receipt includes shipping, delivery, and handling charges.

Q: What if the goods I'm shipping are exempt?
A: Delivery/handling charges generally follow the tax treatment of the goods; on exempt goods they're typically not taxed.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law § 1105(a) (sales tax on retail sales of tangible personal property)
• Tax Law § 1101(b)(3) (receipt includes vendor's charges for shipping or delivery)
• 20 NYCRR 526.5(g) (delivery charges taxable whether or not separately stated); 20 NYCRR 525.2(a)(3) (destination tax)
• TB-ST-838 (Shipping and Delivery Charges; handling included)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales-ao-2020.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a20-55s.pdf

Original ruling text

New York State Department of Taxation and Finance
Office of Counsel

TSB-A-20(55)S
Sales Tax
November 3, 2020

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION
The Department of Taxation and Finance (“the Department”) received a Petition for an
Advisory Opinion from [ REDACTED ] ( “Petitioner”). Petitioner asks whether its crating
charge that is separately itemized on invoices to customers is subject to sales tax.
FACTS
Petitioner sells and distributes terrazzo flooring supplies and natural stone countertop
materials to customers in New York. The flooring supplies and natural stone countertop
materials as sold by Petitioner are subject to sales tax in New York. Petitioner builds a crate and
packages the flooring supplies or stone countertop materials into the crate for transportation and
delivery to customers. Petitioner lists a separate “crating charge” on its invoices.
ANALYSIS
Tax Law § 1105(a) imposes a sales tax upon “receipts from every retail sale of tangible
personal property.” The term “receipt” is defined, in relevant part, as “[t]he amount of the sale
price of any property and the charge for any service taxable under this article … and also
including any charges by the vendor to the purchaser for shipping or delivery.” Tax Law §
1101(b)(3); see 20 NYCRR 526.5. The Department’s Regulations reiterate that a vendor’s
receipt includes shipping or delivery charges where the sale of the property is subject to tax
regardless of whether the vendor separately states such charges on an invoice. See 20 NYCRR
526.5(g). The terms “shipping” and “delivery” also include charges for handling and similar
charges. See TB-ST-838, Shipping and Delivery Charges.
Further, sales tax is generally a destination tax, meaning that the incidence and rate of tax
is controlled by where the taxable service or property is delivered to the customer. See 20
NYCRR 525.2(a)(3).
The Petitioner’s sale of flooring and countertop materials is subject to sales tax. Building
a crate and packing those materials for transportation involves handling of such items in
connection with their delivery. Petitioner must collect tax on such handling charge, referred to
by Petitioner as a “crating charge,” as part of the total receipt subject to tax if delivery occurs in

-2-

TSB-A-20(55)S
Sales Tax
November 3, 2020

New York, regardless of whether the charge is separately stated on invoices. See 20 NYCRR
526.5.
DATED: November 3, 2020
/S/
DEBORAH R. LIEBMAN
Deputy Counsel
NOTE:

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.