Is Shipping Taxable in Tennessee? Tennessee Sales Tax Rules for Shipping and Delivery Charges

Is Shipping Taxable in Tennessee?

In Tennessee, delivery charges are specifically included in the sales price of a transaction. When a seller adds delivery charges, such as shipping, freight, postage, or handling, to an invoice, those charges are taxable if the transaction is taxable and exempt if the transaction is exempt.

Source: Tennessee Department of Revenue, SUT-23 Sales Price – Shipping Charges https://revenue.support.tn.gov/hc/en-us/articles/360058619331-SUT-23-Sales-Price-Shipping-Charges

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General Rule: Delivery Charges Are Included in Sales Price

Tennessee generally includes delivery charges in the sales price of a transaction. If the underlying transaction is taxable, delivery charges added to the invoice are also taxable.

For example:

Product price: USD 100 Shipping charge: USD 8 Taxable sales price: USD 108

If the product is taxable, Tennessee sales tax generally applies to the full USD 108 amount.

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Does Separately Stating Shipping Make It Non-Taxable?

Generally, no. Tennessee law includes delivery charges in the sales price of a transaction. If the transaction is taxable, the shipping or delivery charge is generally taxable even if separately stated.

For example:

Product price: USD 100 Freight charge: USD 8 Total: USD 108

If the transaction is taxable, the USD 8 freight charge is generally taxable.

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What Counts as Delivery Charges?

Tennessee’s guidance gives examples of delivery charges, including:

• shipping;
• freight;
• postage;
• handling;
• other similar charges.

For example:

Product price: USD 100 Shipping charge: USD 8 Handling charge: USD 3 Postage charge: USD 2 Taxable sales price: USD 113

If the underlying transaction is taxable, these delivery-related charges are generally taxable.

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Delivery Charges for Exempt Transactions

If the transaction is exempt, the related delivery charges are also exempt.

Examples may include:

• exempt products;
• sales for resale;
• transactions supported by a valid exemption certificate;
• property or services covered by a statutory exemption;
• other exempt transactions under Tennessee law.

For example:

Exempt product price: USD 100 Delivery charge: USD 8 Total: USD 108

If the transaction is exempt, the related delivery charge is generally not taxable. Sellers should retain proper documentation.

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Common Compliance Issues for Ecommerce Sellers

Assuming separately stated shipping is exempt

In Tennessee, separately stating shipping does not generally make it non-taxable when the underlying transaction is taxable.

Taxing only the product price

If a seller excludes shipping, freight, postage, or handling charges from taxable Tennessee transactions, the seller may under-collect tax.

Ignoring freight, postage, and handling

Tennessee delivery charges include more than charges labeled “shipping.” Sellers should review all delivery-related invoice lines.

Not documenting exempt transactions

If the transaction is exempt, delivery charges are generally exempt as well, but the seller should retain exemption certificates, resale certificates, and order documentation.

Applying another state’s rule to Tennessee

Shipping taxability varies by state. Tennessee should be configured separately from states with different delivery charge rules.

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Practical Tips for Sellers Shipping to Tennessee

Sellers shipping taxable goods or providing taxable services to Tennessee customers should generally include delivery charges in the taxable sales price. This includes shipping, freight, postage, handling, and similar invoice charges.

For exempt transactions, sellers should retain exemption certificates, resale certificates, invoices, product or service classification records, order details, marketplace reports, and sales tax filing records. Platform settings for Shopify, WooCommerce, Amazon, Walmart, eBay, and custom websites should align with Tennessee’s rules.

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Conclusion

In Tennessee, delivery charges are included in the sales price of a transaction. When a seller adds delivery charges to an invoice, those charges are taxable if the transaction is taxable and exempt if the transaction is exempt.

For ecommerce sellers, the key takeaway is clear: Tennessee shipping, freight, postage, handling, and similar delivery charges generally follow the taxability of the underlying transaction.

Source: Tennessee Department of Revenue, SUT-23 Sales Price – Shipping Charges https://revenue.support.tn.gov/hc/en-us/articles/360058619331-SUT-23-Sales-Price-Shipping-Charges