Sales/Use Tax Update: Shipping Fees

by Karen Stern

A decision in a recent court case, Alberici Constructors v. Director of Revenue, has led to a rise in sales tax audit activity for businesses that charge or pay for shipping fees in Missouri. The Department of Revenue has begun sending notices to all taxpayers registered with the department as selling tangible personal property that may be delivered to Missouri customers.

All businesses, whether or not they have received a notice, should be aware of this potential audit risk. Here is what you need to know:

• The decision in this case is inconsistent with prior interpretations regarding the taxability of shipping charges. Historically, shipping charges were not subject to sales/use tax if they were optional and separately stated on the invoice.

• While it is inconsistent, it has not been repealed. Since the Missouri Department of Revenue’s regulation for this topic has not been repealed, most practitioners would assume it is a reliable interpretation of the law.

• What does this mean for your business? Based on the court’s interpretation, shipping charges related to a taxable transaction are subject to sales/use tax regardless of the misleading guidance provided in the current regulation.

The department has been identifying this noncompliance in recent audits. Visit bswllc.com/salesusetax to download “6 Key Steps to Navigating Sales and Use Tax Compliance.” If your business is susceptible to this ruling, please contact Amy Jackson, manager, tax services, at 314-983-1336 or ajackson@bswllc.com.

Karen Stern, CPA, (kstern@bswllc.com), partner in charge, Brown Smith Wallace Entrepreneurial Services Group, provides tax and accounting services for companies ranging from start-ups to $20 million in revenue.