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RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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Should I be paying sales tax on the seperate freight ...

Resolved Question:

Should I be paying sales tax on the seperate freight cost when I purchase materials from my vendors. I do pay sales tax on my product but I am not sure if I am required to pay sales tax on the freight. Thanks
Submitted: 11 years ago.
Category: Tax
Expert:  RD replied 11 years ago.

Can you explain your business activity....

You buy materials from vendors and pay tax on the material. ..and pay sales tax on the product (do you mean the material that you buy).....what do you sell...are you into manufacturing?

Customer: replied 11 years ago.
Reply to Renu V's Post: Thanks for your quick response. Here are my details. I am located in Florida. I purchase materials from vendors in other states. They are charging me the Florida sales tax rates and remitting to the state of Florida. I have one large vendor who list the freight charges at the bottom of our invoices after the materials and sales tax have been calculated. Therefore, i am not charged sales tax on freight. I have another large vendor who is listing the freight charges after the materials but before the sales tax is calculated. Therfore, they are charging me sales tax on the freight. I beleive this is inaccurate and I am not required to pay sales tax on the freight cost. I am trying to confirm this in order to go back to my vendor and get thsi situation cleared up. I do not manufacture, i distribute and install product that I purchase from these vendors. I hope this is ample information for you to answer my question. I look forward to your reply.

Expert:  RD replied 11 years ago.

Thank you for the detailed information.

Here's how this works.....

Transportation service is not subject to tax when the charge is separately stated on an invoice or bill of sale and the charge can be avoided by a decision or action solely on the part of the purchaser.

Florida sales tax is imposed on the total sales price of taxable tangible personal property.

Sales price is defined as the total amount paid for tangible personal property, including any services that are a part of the sale. Transportation is a service typically sold in conjunction with the sale of tangible personal property.

The Florida Administrative Code (Rule 12A‑1.045), states:

“(1) Transportation charges include carrying, delivery, freight, handling, pickup, shipping, and other similar charges or fees.

“(2) Transportation charges which are not separately stated on an invoice or bill of sale, but are included in the sales price of taxable tangible personal property, are subject to tax.

“(3)(a) Where the seller agrees to deliver tangible personal property to some designated place and the purchaser cannot elect to avoid the charge for transportation services, the charge for the transportation service is subject to tax, even if separately stated on an invoice or bill of sale.

The charge can be avoided when the purchaser arranges for pick up and delivery of the goods themselves, the charge is exempt. If a dealer does not allow the customer to pick up the merchandise, the transportation charge becomes a part of the selling price, and is subject to tax.

Let me know if you have any question.

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Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases.

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