Washington Administrative Code › Title 458 - Revenue, Department of › Chapter 458-20 - Excise tax rules › Section 458-20-110 - Delivery charges

Current through Register Vol. 24-14, July 15, 2024
(1)
Introduction.
This section explains the manner in which delivery
			 charges are considered for purposes of business and occupation (B&O),
			 retail sales, and use taxes. For information about delivery charges with regard
			 to promotional materials, see WAC
			 458-20-17803 (Use tax on
			 promotional materials).
(2)
What are delivery charges?
"Delivery charges" means charges by the
			 seller for preparation and delivery to a location designated by the purchaser
			 of tangible personal property or services including, but not limited to,
			 transportation, shipping, postage, handling, crating, and packing.
(3)
Do the business and occupation
			 (B&O) and retail sales taxes apply to delivery charges?
The measure
			 of the tax is "gross proceeds of sales" for B&O tax (RCW
			 82.04.070 ) and "selling price" for retail
			 sales tax (RCW 82.08.010 ). Gross proceeds of
			 sales and selling price include all consideration paid by the buyer, without
			 any deduction for costs of doing business such as material, labor, and
			 transportation costs, including delivery charges. Thus, delivery charges by the
			 seller are a component of these tax measures.
(a)
What if delivery charges are
			 separately itemized on the sales invoice?
Amounts received by a seller
			 from a buyer for delivery charges are included in the measure of tax regardless
			 of whether charges for such costs are billed separately, itemized, or whether
			 the seller is also the carrier. Limiting delivery charges to the actual cost of
			 delivery to the seller does not affect taxability.
(b)
Does retail sales tax apply to all
			 delivery charges by the seller?
Delivery charges by the seller making a
			 retail sale are a component of the selling price. If the sale of the tangible
			 personal property or service is exempt from retail sales tax, such as certain
			 "food and food ingredients," retail sales tax does not apply to the selling
			 price, including delivery charges, associated with that sale. Similarly, if the
			 product is sold at wholesale, retail sales tax does not apply to the delivery
			 charges of that sale.
If a retail sale consists of both taxable and nontaxable
				tangible personal property, and delivery charges are a component of the selling
				price, retail sales tax applies to the percentage of delivery charges allocated
				to the taxable tangible personal property. Retail sales tax is not due on
				delivery charges allocated to exempt tangible personal property.
The seller may use either of the following percentages to
				determine the taxable portion of the delivery charges:
(i) A percentage based on the total sales
			 price of the taxable tangible personal property compared to the total sales
			 price of all tangible personal property in the shipment; or
(ii) A percentage based on the total weight
			 of the taxable tangible personal property compared to the total weight of all
			 tangible personal property in the shipment.
(c)
Are there any situations in which
			 delivery charges by the seller may be excluded from the measure of tax?
There is no specific exclusion from the measure of tax for delivery charges by
			 the seller. Actual delivery costs, regardless of whether separately charged,
			 may be excluded from the measure of the manufacturing and extracting B&O
			 taxes when the products are delivered outside the state. For further
			 discussion, refer to WAC
			 458-20-112 (Value of products).
			 WAC 458-20-13501 (Timber harvest
			 operations) provides guidance regarding this issue for persons engaged in
			 activities associated with timber harvesting.
(d)
Delivery charges in cases of
			 payments to third parties.
Delivery charges incurred after the buyer
			 takes delivery of the goods are not part of the selling price when the seller
			 is not liable for payment of the delivery charges. To be excluded from the
			 gross proceeds of sales for B&O tax and selling price for retail sales tax,
			 the seller must document that the buyer alone is responsible to pay the carrier
			 for the delivery charges.
(e)
Examples.
The following examples identify a number of facts and
			 then state a conclusion. These examples should be used only as a general guide.
			 The tax results of other situations must be determined after a review of all of
			 the facts and circumstances. In these examples, if the seller had been required
			 to collect use tax (RCW 82.12.040 ) instead of retail
			 sales tax (RCW 82.08.050 ), the use tax
			 collection responsibility remains the same as for retail sales tax. This is
			 because, in this context, the "value of article used" has the same meaning as
			 the "purchase price" or "selling price."
(i)
Example 1.
Jane Doe orders a life vest from Marine Sales and
			 requests that the vest be mailed by the United States Postal Service to her
			 home. Marine Sales places the correct postage on the package using its postage
			 meter and separately itemizes a charge on the sales invoice to Jane at the
			 exact amount of the postage cost. Marine Sales is subject to the retailing
			 B&O tax on the gross proceeds of the sale and must collect retail sales tax
			 on the selling price, both of which measures of tax include the charge for
			 postage.
(ii)
Example
			 2.
XYZ Corporation orders equipment from ABC Distributors and provides
			 ABC with a properly completed resale certificate (WAC
			 458-20-102A ), for purchases made
			 before January 1, 2010, or a reseller permit (WAC
			 458-20-102 ), for purchases made
			 on or after January 1, 2010. ABC ships the equipment using overnight air
			 delivery and itemizes the actual amount of its shipping costs on the sales
			 invoice. ABC must remit wholesaling B&O tax on the gross proceeds of sale,
			 which includes the amount billed as shipping charges. Since the equipment is
			 purchased for resale, ABC does not collect or report retail sales
			 tax.
(iii)
Example 3.
The facts in this example are the same as those in (ii) of this subsection
			 except that XYZ provides ABC with a properly completed exemption certificate.
			 Retail sales tax does not apply to the delivery charge because the selling
			 price, of which the delivery charge is a component, is exempt from retail sales
			 tax. However, the delivery charge is included in the gross proceeds of the
			 sale, and thus, is subject to retailing B&O tax.
(iv)
Example 4.
Jones Computer
			 Supply, a distributor, makes retail sales of computer products primarily by
			 mail order. It is the practice of Jones Computer Supply to add a ten-dollar
			 handling charge for each order. No separate charge is made for actual
			 transportation. The handling charge is part of the measure of tax for the
			 retailing B&O and retail sales taxes.
(v)
Example 5.
ABC Construction
			 in Seattle purchased a new saw from XYZ, Inc. The sales contract specifies that
			 ABC will contract with MNO, Inc. for shipping to Seattle and that MNO, Inc.
			 will pick up the saw in Spokane. ABC does contract with MNO for the shipping
			 and is shown as the consignor on the bill of lading. The transportation charge
			 is not included in the measure of tax for purposes of the retailing B&O and
			 retail sales taxes because ABC, the buyer, is liable for payment to MNO, for
			 shipping the new saw.