Is Shipping Taxable in Kentucky? Kentucky Sales Tax Rules for Shipping and Handling
In Kentucky, separately stated shipping charges may be exempt from sales tax when taxable products are shipped to a customer-specified point and delivered by the postal service or common carrier. However, shipping charges are generally taxable when the seller makes the delivery. Handling charges are always taxable, and combined shipping and handling charges are taxable regardless of who makes the delivery. This article explains Kentucky shipping sales tax rules for ecommerce sellers.
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Is Shipping Taxable in Kentucky?
Kentucky shipping sales tax rules are more specific than simply asking whether shipping is separately stated. Separately stated shipping charges to deliver taxable products to the customer may be exempt from tax when the products are shipped to a point specified by the customer and delivered by the postal service or common carrier.
However, shipping charges are generally taxable when the actual seller makes the delivery. Handling charges are always taxable. If the seller invoices a single combined charge for shipping and handling, that combined charge is taxable regardless of who makes the delivery. Delivery charges are also taxable when the retailer is responsible for installing the product upon delivery.
Source: Kentucky Department of Revenue, Sales Tax Facts, April 2004 https://revenue.ky.gov/DOR%20Training%20Materials/Sales%20Tax%20Facts%202004%20-%20Apr.pdf
When Are Shipping Charges Non-Taxable in Kentucky?
A shipping charge may be non-taxable in Kentucky when the following conditions are met.
1. The shipping charge is separately stated
The shipping charge should be clearly shown as a separate line item on the invoice, receipt, bill of sale, or checkout summary.
For example:
Product price: USD 100 Shipping charge: USD 8 Total: USD 108
If shipping is included in the product price, there may be no separately stated charge to exclude.
For example:
Product price, shipping included: USD 108
In this case, the full USD 108 may be treated as the taxable product price.
2. The goods are shipped to a point specified by the customer
Kentucky’s rule applies when taxable products are shipped to a point specified by the customer. In ecommerce transactions, this often means the customer’s shipping address or another delivery point selected by the purchaser.
3. Delivery is made by the postal service or common carrier
The shipping charge must relate to delivery by the postal service or common carrier. If the seller delivers the product using its own vehicle, employees, or internal delivery service, the shipping charge is generally taxable.
When Are Delivery or Shipping Charges Taxable in Kentucky?
1. Seller delivery is generally taxable
If the actual seller of the product makes the delivery, shipping charges are generally taxable.
For example:
Product price: USD 100 Seller delivery charge: USD 8 Total: USD 108
In this case, the USD 8 seller delivery charge is generally taxable.
2. Handling charges are always taxable
Kentucky states that handling charges are always taxable. This means handling should not be treated the same as qualifying separately stated shipping.
For example:
Product price: USD 100 Shipping charge: USD 8 Handling charge: USD 3 Total: USD 111
The USD 3 handling charge is generally taxable, even if the USD 8 shipping charge qualifies for exempt treatment.
3. Combined shipping and handling charges are taxable
If the seller invoices the customer for one combined shipping and handling charge, the entire combined charge is taxable regardless of who makes the delivery.
For example:
Product price: USD 100 Shipping and handling: USD 11 Total: USD 111
In this case, the USD 11 combined charge is generally taxable.
4. Delivery charges involving installation are taxable
Delivery charges are also taxable when the retailer is responsible for installing the product upon delivery. This is especially relevant for furniture, appliances, equipment, fixtures, and other products that may involve installation services.
Common Compliance Issues for Ecommerce Sellers
Assuming separately stated shipping is always exempt
In Kentucky, separately stating shipping is not enough. The delivery must also be made by the postal service or common carrier and shipped to a point specified by the customer.
Combining shipping and handling
A combined shipping and handling charge is taxable regardless of who makes the delivery. Sellers should separate shipping and handling if they want to preserve the possibility of exempt shipping treatment.
Treating handling as non-taxable shipping
Handling charges are always taxable in Kentucky. They should not be included in a non-taxable shipping line item.
Ignoring seller delivery
If the seller makes the delivery, the shipping or delivery charge is generally taxable.
Ignoring installation
If the retailer is responsible for installing the product upon delivery, the delivery charge is taxable.
Practical Tips for Sellers Shipping to Kentucky
Sellers shipping taxable products to Kentucky customers should review invoice presentation, carrier records, and fulfillment methods. If the seller intends to treat shipping as non-taxable, the charge should be separately stated, the product should be shipped to a customer-specified point, and delivery should be made by the postal service or common carrier.
Sellers should avoid using a combined “shipping and handling” line item. Handling charges should be separately tracked and treated as taxable. Sellers should also keep invoices, carrier records, tracking information, delivery method records, installation records, marketplace reports, and sales tax reports.
Conclusion
In Kentucky, separately stated shipping charges may be non-taxable when taxable products are shipped to a point specified by the customer and delivered by the postal service or common carrier. However, shipping charges are generally taxable when the seller makes the delivery.
Handling charges are always taxable, combined shipping and handling charges are taxable regardless of delivery method, and delivery charges are taxable when the retailer is responsible for installation upon delivery.
For ecommerce sellers, the key compliance takeaway is clear: Kentucky shipping taxability depends on invoice presentation, carrier type, handling charges, and whether delivery includes installation.
Source: Kentucky Department of Revenue, Sales Tax Facts, April 2004 https://revenue.ky.gov/DOR%20Training%20Materials/Sales%20Tax%20Facts%202004%20-%20Apr.pdf