SALT Report 2513 – The Indiana Department of Revenue issued a letter of finding regarding the taxability of postage costs that a Taxpayer charged its customers to deliver their printed materials. The Taxpayer is a commercial printing company who prints business cards, envelopes, and wedding materials. As a courtesy to its customers, the Taxpayer will, on occasion, mail the finished printed materials directly to its customers’ clients. In this case, the Taxpayer would collect sales tax on the delivery charges and the printed materials; however, the Taxpayer would not charge sales tax on the postage costs.
Subsequently, the Department of Revenue conducted an audit of the Taxpayer’s business records which resulted in a sales tax assessment. The auditor determined that the Taxpayer should have collected sales tax on the postage charges because they were part of a “unitary transaction” billed to the customer.
The Taxpayer disagreed with the assessment and filed a protest claiming that postage should not be included in the transaction and that “neither the [Taxpayer] nor its customers intended or consider postage to be part of the overall sale.” The Taxpayer explained that he simply covers the postage, as a convenience to its customers, and then seeks reimbursement from the customer once the materials are mailed. Further, the Taxpayer stated that it did not add any additional charges to the postage and that they were always separately stated or billed.
In its response the Department upheld the auditor’s determination that the postage charges were part of a unitary transaction as defined by 45 IAC 2.2-1-1(a). The regulation states that, “a unitary transaction includes all items of property and/or services for which a total combined charge or selling price is computed for payment irrespective of the fact that services which would not otherwise be taxable are included in the charge or selling price.”
Further, the fact that, the price billed for “postage” was stated on a separate invoice does not circumvent IC § 6-2.5-1-5 which states that “gross retail income” includes “delivery charges” and that all costs associated with performing the delivery are considered postage and are taxable. In addition, the Department clarified that Indiana law does not provide a deduction for the cost of postage, even if separately stated.
Based on those findings, the Department found that the Taxpayer was unable to establish that the sales tax assessment was wrong assessed as required by IC § 6-8.1-5-1(c). Therefore, the Taxpayer’s protest was dismissed and the sales tax assessment was upheld.
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