How do I handle delivery charges during the State Sales Tax Holiday?

How do I handle delivery charges during the State Sales Tax Holiday?

Delivery charges are part of the selling price of an item of clothing for purposes of calculating the $100 threshold unless the seller and buyer have a separate agreement for delivery.  Follow these steps.

Step 1:  Determine if there is a separate agreement for delivery.  A separate agreement is established

• when the seller and the buyer have a separate contract for delivery charges and those charges do not exceed the cost of delivery (they are taxable to the extent they exceed the actual cost of delivery); or
• the seller can document that the buyer has the option of taking delivery at the seller's location for the agreed purchase price or having delivery made for the agreed purchase price plus an ascertainable delivery charge (they are taxable to the extent that they exceed the actual cost of delivery).  Example:  An on-line or catalog seller offers buyers the option of picking up the item at a local store.  If a separate agreement exists, delivery charges are not part of the item's selling price.  Do not add delivery charges to the item's selling price for purposes of calculating the $100 threshold.  Do not go to Step 2.
• If a separate agreement does not exist, the delivery charge should be apportioned to each item.  Go to Step 2.

Step 2:  Calculate what percentage of the total order (not including delivery) is attributable to each item.  Apply that percentage to the total delivery charge to apportion the delivery charge to each item.  Next, add the apportioned delivery charge to each item to determine if the $100 threshold is met.  Please see FY 2010-17 for more information.

Example:  Two jackets purchased (one for $95 and one for $60) as part of one transaction with a $10 delivery charge-
$95 Jacket
     $95 is 61% of $155 subtotal.
     61% of $10 delivery charge
     =$6.10; total price for purposes of calculating threshold is $101.10, ineligible for the states sales tax holiday rate

$60 Jacket
     $60 is 39% of $155 subtotal
     39% of $10 delivery charge
     =$3.90; total price for purposes of calculating threshold is $63.90; eligible for state sales tax holiday rate

$155     Subtotal
$10       Delivery
$165     Total

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