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Is shipping taxable in California? Invoice and freight records
Shipping tax treatment depends on how the sale and delivery are arranged and documented. Keep the customer charge, carrier cost and invoice wording together before deciding which amount is taxable.
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General information, not legal or tax advice.
Check the conditions for excluded transportation
Regulation 1628 describes separately stated transportation directly to the buyer by a carrier other than the retailer’s own facilities. The excluded amount cannot exceed the retailer’s transportation cost. Review the carrier invoice and customer invoice together rather than assuming every delivery line is exempt.
Sources: CDTFA Regulation 1628, Transportation Charges (Business Taxes Law Guide, Revision 2026)
Separate freight from handling and markup
For combined shipping and handling, only the qualifying actual shipment portion may be excluded. A separately stated handling charge remains taxable in a taxable sale. CDTFA also treats the amount charged above actual delivery cost as taxable. Preserve a clear breakdown instead of assigning the entire combined line to shipping.
Sources: CDTFA Regulation 1628, Transportation Charges (Business Taxes Law Guide, Revision 2026); CDTFA Publication 100, Applying Sales Tax
Retain evidence of the actual delivery cost
CDTFA identifies freight invoices, postal receipts, delivery receipts and related documents as support. Without records of an individual delivery’s actual cost, the entire delivery charge on a taxable sale is taxable. Connect each supporting charge to its sale, especially when the carrier bills several deliveries together.
Sources: CDTFA Publication 100, Shipping and Delivery Charges
Reconcile delivery deductions on the return
CDTFA says total sales include the delivery amounts, with qualifying nontaxable delivery charges deducted under other deductions. If tax was collected on a nontaxable delivery charge, it must be refunded or paid to CDTFA. Review the invoice and return treatment together before adjusting the ledger.
Sources: CDTFA Publication 100, Shipping and Delivery Charges; CDTFA Publication 100, Applying Sales Tax
Sources: check the conditions for excluded transportation
Check shipping records against sales
Tidwell helps reconcile sales and purchase records and supports sales tax filing within an agreed scope. Bring your account instructions and the questions you need to review with your CPA.