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Navigating Shipping and Handling Burdens for US Sales Tax Compliance

by Shelby Toto
Senior Strategy Program Manager, Sovos
July 07 2023

As an active part of the supply chain, you're well aware of the importance of sales tax compliance. However, when it comes to shipping and handling fees, navigating the complex landscape of US sales tax requirements can be burdensome. Let’s explore the challenges associated with shipping and handling fees for US sales tax compliance in order to address them effectively.

Understanding Sales Tax on Shipping and Handling Fees:

One of the key considerations in sales tax compliance is the treatment of shipping and handling fees. Different states in the US have varying rules regarding the taxability of these charges. In some states, shipping and handling fees are considered part of the taxable sales price, while in others, they may be exempt from sales tax altogether. As a result, businesses operating in multiple states must carefully evaluate and apply the correct tax rules for each jurisdiction.

The crucial step of determining the correct sales tax amount on shipping and handling fees requires accurately identifying the tax rates applicable to the destination of the shipment. With constantly changing rates and complex sourcing rules, manual calculations can be time-consuming and prone to errors. Exemptions for shipping and handling fees can vary from state to state. It's essential to keep track of the specific exemptions and apply them correctly during the sales tax calculation process. Failure to do so may result in overcharging customers or non-compliance with state tax laws.

Logistics teams need to manage a range of process-related fees, tasks, and rules. Common examples include:

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About Shelby Toto

Shelby Toto began her career at Sovos assisting mid-sized and enterprise-sized companies manage their exemptions and growing US complexities. With experience in software, retail, telecommunications and more, she has provided expertise and consultation throughout her pre-sales conversations in her past role as a sales engineer. Shelby currently gains insight into the buying and selling processes businesses face when solving for sales & use tax, with partners and companies of various sizes, and analyses trends within the industry.

Sovos was built to solve the complexities of the digital transformation of tax, with complete, connected offerings for tax determination, continuous transaction controls, tax reporting and more. Sovos customers include half the Fortune 500, as well as businesses of every size operating in more than 70 countries. The company’s SaaS products and proprietary Sovos S1 Platform integrate with a wide variety of business applications and government compliance processes. For more information visit www.sovos.com.

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