Illinois – Taxability of Delivery Charges Contracted for Separately

SALT Report 1744 – The Illinois Department of Revenue has issued a general information letter regarding the taxability and documentation requirements for transportation or delivery charges. Generally, these charges are not taxable as provided in 86 Ill. Adm. Code 130.415 which state that, “charges designated as delivery or transportation charges are not taxable if it can be shown that they are both agreed to separately from the selling price of the tangible personal property which is sold and that such charges are actually reflective of the costs of shipping.”

In other words, when the seller delivers tangible personal property to the buyer, and the seller and buyer agree on a charge for the delivery service that is separate from the sale price of the tangible personal property, then the cost of the transportation or delivery service is not considered part of the selling price of the property.  Instead, these charges are considered a service charge that is separately contracted for and should not be included in the amount that the seller uses to calculate the tax liability.

To support that a delivery charge has been separately agreed upon, the seller must provide more than a separate line charge on an invoice. The best evidence that these charges were agreed to separately and apart from the selling price is a separate contract for transportation or delivery services. However, documentation that verifies that the purchaser had the option of taking delivery of the property at the seller’s location for the purchase price, or having delivery made by the seller for the purchase price plus a pre-determined delivery charge is sufficient.

The Department also notes that it has filed proposed rulemaking regarding the taxability of delivery charges.

For Further Information:

Illinois Department of Revenue – General Information Letter ST 12-0029-GIL