In Vermont, if an item is taxable, tax is also due on delivery and freight charges for delivering that item. If the item is tax-exempt, delivery charges are also exempt. For mixed packages containing both taxable and tax-exempt items, shipping tax applies only to the taxable portion and may be allocated based on the percentage of price or weight of taxable items in the package.
In Vermont, if an item is taxable, tax is also due on delivery and freight charges for delivering that item. If the item is tax-exempt, delivery charges are also exempt. For mixed packages containing both taxable and tax-exempt items, shipping tax applies only to the taxable portion and may be allocated based on the percentage of price or weight of taxable items in the package.
On this page
- Is Shipping Taxable in Vermont?
- General Rule: Shipping Is Taxable When the Item Is Taxable
- Shipping for Tax-Exempt Items
- Does Separately Stating Shipping Make It Non-Taxable?
- Mixed Packages: Taxable and Tax-Exempt Items
- Common Compliance Issues for Ecommerce Sellers
- Practical Tips for Sellers Shipping to Vermont
- Conclusion
Is Shipping Taxable in Vermont?
In Vermont, if the item is taxable, tax is also due on delivery and freight charges for delivery of that item. Conversely, if the item is tax-exempt, delivery charges are also exempt.
When shipping a package containing both taxable and tax-exempt items, tax is due on shipping only for the taxable portion of the order. The tax on delivery or freight charges may be applied based on the percentage of either the price or the weight of taxable items in the package.
Source: Vermont Department of Taxes, Sales and Use Tax FAQs https://tax.vermont.gov/business-and-corp/sales-and-use-tax/faqs
General Rule: Shipping Is Taxable When the Item Is Taxable
Vermont generally taxes delivery and freight charges when the item being delivered is taxable.
For example:
Product price: USD 100 Delivery charge: USD 8 Taxable amount: USD 108
If the product is taxable, Vermont sales tax generally applies to both the product price and the related delivery charge.
Shipping for Tax-Exempt Items
If the item is tax-exempt, the related delivery charge is also exempt.
Examples may include:
- tax-exempt products;
- sales for resale;
- transactions supported by a valid exemption certificate;
- other exempt transactions under Vermont law.
For example:
Tax-exempt product price: USD 100 Delivery charge: USD 8 Total: USD 108
If the item is tax-exempt, the related delivery charge is generally exempt as well. Sellers should retain proper documentation.
Does Separately Stating Shipping Make It Non-Taxable?
Generally, no. Vermont’s rule focuses on whether the item being delivered is taxable or tax-exempt.
For example:
Product price: USD 100 Freight charge: USD 8 Total: USD 108
If the product is taxable, the USD 8 freight charge is generally taxable even if separately stated.
Mixed Packages: Taxable and Tax-Exempt Items
Vermont provides specific guidance for packages that contain both taxable and tax-exempt items. In that case, tax is due on shipping only for the taxable portion of the order.
The taxable portion may be calculated based on either:
- the percentage of the price of taxable items in the package; or
- the percentage of the weight of taxable items in the package.
Allocation by price
Taxable item price: USD 60 Tax-exempt item price: USD 40 Total product price: USD 100 Shipping charge: USD 10
Taxable items represent 60% of the order price. The taxable shipping portion may be USD 6.
Allocation by weight
Taxable item weight: 2 lb Tax-exempt item weight: 3 lb Total package weight: 5 lb Shipping charge: USD 10
Taxable items represent 40% of the package weight. The taxable shipping portion may be USD 4.
Common Compliance Issues for Ecommerce Sellers
Assuming separately stated shipping is exempt
In Vermont, separately stating shipping does not generally make it non-taxable if the item is taxable.
Taxing only the product price
If a seller excludes delivery or freight charges for taxable items, the seller may under-collect tax.
Mishandling mixed orders
For packages containing both taxable and tax-exempt items, sellers should tax only the shipping portion connected to taxable items.
Not documenting allocation
If shipping tax is allocated by price or weight, sellers should keep supporting records.
Applying another state’s rule to Vermont
Shipping taxability varies by state. Vermont should be configured separately from states with different delivery charge rules.
Practical Tips for Sellers Shipping to Vermont
Sellers shipping to Vermont customers should determine whether each item is taxable or tax-exempt. If the item is taxable, related delivery and freight charges should generally be taxed. If the item is tax-exempt, related delivery charges are generally exempt.
For mixed packages, sellers should document whether shipping tax is allocated by price or weight. Sellers should retain invoices, checkout records, product taxability records, item weights, shipping records, exemption certificates, marketplace reports, and sales tax filing records.
Conclusion
In Vermont, delivery and freight charges follow the taxability of the item being delivered. If the item is taxable, delivery and freight charges are taxable. If the item is tax-exempt, delivery charges are exempt.
For packages containing both taxable and tax-exempt items, tax applies only to the shipping portion related to taxable items. That portion may be allocated by price percentage or weight percentage. For ecommerce sellers, the key takeaway is clear: Vermont shipping taxability depends on item taxability and proper allocation for mixed packages.
Source: Vermont Department of Taxes, Sales and Use Tax FAQs https://tax.vermont.gov/business-and-corp/sales-and-use-tax/faqs