Are combined shipping-and-handling charges on a mail-order purchase subject to New York sales tax?

Plain-English summary

Neil A. Harrison buys compact discs by mail from Columbia House, a record club in Indiana. His bill separately states the cost of each disc and a combined charge for shipping and handling, and computes sales tax on the total of the disc cost plus shipping and handling. He asked whether those shipping-and-handling charges are subject to New York sales and use tax.

The Department held that the entire combined charge is taxable:

• Separately stated delivery is excludable. Under § 526.5(g), the cost of transporting tangible personal property sold at retail — if separately stated in the contract (if any) and on the bill to the purchaser — is excluded from the taxable receipt (and the delivery must be to the purchaser).
• Handling is always taxable. As TSB-M-84(13)S explains, a vendor's charge to transport property to the purchaser is excluded only when separately stated, but handling costs are part of the taxable receipt. Critically: "If transportation, postage, shipping or similar charges that would otherwise be exempt are combined with handling charges in a single amount, the entire charge becomes subject to sales tax."
• Result. Because Columbia House combines shipping and handling into a single amount, Harrison must pay sales tax on the entire combined charge under § 526.5(g) and TSB-M-84(13)S.

What this means for you

"Shipping and handling" on one line is fully taxable

New York lets a seller exclude a genuine delivery charge from tax — but only if it's separately stated. The moment shipping is lumped together with handling into a single "S&H" figure, the whole thing is taxed, because the otherwise-excludable delivery charge loses its separate identity.

Sellers: separate the delivery charge to keep it tax-free

If you want the transportation-to-the-customer portion excluded, list it as its own line item, apart from handling. Bundling the two forfeits the exclusion for the delivery piece.

Buyers: this is why your S&H gets taxed

If a mail-order or online invoice shows a single combined shipping-and-handling charge, expect sales tax on the full amount — that's the correct treatment, not an error.

Common questions

Q: Is shipping taxable in New York?
A: A delivery charge to the purchaser is excluded from tax if separately stated (§ 526.5(g)). But if it's combined with handling in one amount, the whole combined charge is taxable.

Q: Why did the seller charge tax on my whole "shipping and handling" line?
A: Because it combined shipping (which could be excluded) with handling (which is taxable) into a single amount, making the entire charge taxable under TSB-M-84(13)S.

Q: How can a seller keep the delivery charge tax-free?
A: By separately stating the transportation-to-the-customer charge apart from handling, so it qualifies for the § 526.5(g) exclusion.

Citations and references

Regulation and guidance:

• 20 NYCRR § 526.5(g) — cost of transportation of property sold at retail is excluded from the taxable receipt only if separately stated and for delivery to the purchaser
• Tax Law § 1101(b)(3) — definition of "receipt"
• TSB-M-84(13)S — taxable status of transportation and handling charges; combining excludable transportation with handling in a single amount makes the entire charge taxable

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1991.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a91_37s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-91 (37)S
Sales Tax
April 29, 1991

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S910311A

On March 11, 1991, a Petition for Advisory Opinion was received from Neil A. Harrison,
912 Eileen Terrace, Woodmere, New York 11598.
The issue raised by Petitioner, Neil A. Harrison, is whether shipping and handling charges
paid in connection with the purchase of compact discs through a mail order service are subject to
State and local sales and use taxes.
Petitioner belongs to Columbia House, a club located in Indiana, for the purchase of musical
recordings on cassette tapes and compact discs. Petitioner periodically receives brochures from
Columbia House which describe current available selections.
Petitioner occasionally orders compact discs, which are sent to him via U.S. Mail. Petitioner
is billed by Columbia House for the compact discs, shipping and handling charges and New York
State sales tax. The bill separately states the cost of each compact disc and a combined charge for
shipping and handling of each compact disc and computes sales tax on the total of the cost of the
compact disc and shipping and handling.
Section 526.5 of the Sales and Use Tax Regulations provides, in part, as follows:
*
*
*
(g)
Transportation. (1) The cost of transportation of tangible personal property,
sold at retail, which is separately stated in written contract, if any, and on the bill
rendered to the purchaser is excluded from the receipts subject to the tax.
(2)
To qualify for the exclusion transportation costs must be for the
delivery of the tangible personal property to the purchaser. Any charge made to a
retail purchaser, whether labeled transportation, handling or some other designation,
which represents the cost of transportation between a supplier, manufacturer,
warehouse, or catalog or other distribution point, and the vendor's place of business
constitutes part of the receipt subject to tax.
Technical Service Bureau Memorandum, TSB-M-84(13)S, concerning the "Taxable Status
of Charges for Transportation and Handling of Tangible Personal Property" provides, in part, as
follows:
Section 1101(b)(3) of Article 28 of the Tax Law provides that a vendor's charge to
a retail purchaser for transporting tangible personal property to the purchaser's point
of delivery is to be excluded from receipts subject to tax when such charge is

-2­
TSB-A-91 (37)S
Sales Tax
April 29, 1991
separately stated in the written contract, if any, and on the bill given to the purchaser.
Charges are deemed to be separately stated if they can be computed from information
appearing on the bill given to the purchaser (Regulation Section 526.5(g)(3)).
*

*

*

Handling costs are also part of the receipt subject to tax. If transportation, postage,
shipping or similar charges that would otherwise be exempt are combined with
handling charges in a single amount, the entire charge becomes subject to sales tax.
(Emphasis added)
Example:
(5)

A New York State resident living in a 7% taxing jurisdiction purchases merchandise
from a mail order house. The mail order house charges the customer a combined
amount for postage and handling. The resident should be billed as follows:
Cost of taxable merchandise
Postage and handling
Amount subject to tax
Sales tax at 7%
Total due

$260.00
10.00
$270.00
18.90
$288.90

Accordingly, since Columbia House combines the charges for shipping and handling into a
single amount, Petitioner must pay sales tax on the entire amount in accordance with Section
526.5(g) of the Sales and Use Tax Regulations and TSB-M-84(13)S.

DATED: April 29, 1991

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.