DEPARTMENT OF STATE REVENUE
Information Bulletin #92
Sales Tax
December 2019
(Replaces Commissioner's Directive #23 issued July 2013)
Effective Date: Upon Publication
SUBJECT: Delivery and Installation Charges Subject to Indiana Sales and Use Tax
DISCLAIMER: Information bulletins are intended to provide nontechnical assistance to the general public. Every attempt is made to provide information that is consistent with the appropriate statutes, rules, and court decisions. Any information that is not consistent with the law, regulations, or court decisions is not binding on either the department or the taxpayer. Therefore, the information provided herein should serve only as a foundation for further investigation and study of the current law and procedures related to the subject matter covered herein.
Aside from technical, nonsubstantive changes, this bulletin effectively provides the same information as it had before when it was published under the title Commissioner's Directive #23.
"Gross retail income," is the total amount of consideration received by a retail merchant in a retail transaction upon which a retail merchant must charge Indiana sales tax The definition of "gross retail income" provides which types of additional charges in a retail transaction are or are not subject to sales tax. This bulletin specifically describes the policy regarding delivery and installation charges.
Delivery charges consist of transportation, shipping, crating, handling, and packing, whether or not separately stated on the invoice, bill of sale, or similar document. Delivery charges also include postage charges that are not separately stated on the invoice, bill of sale, or similar document; however, the definition of delivery charges excludes postage charges that are separately stated on the invoice, bill of sale, or similar document. In other words, separately stated postage charges do not constitute gross retail income and are not subject to sales tax. "Postage charges" are defined to mean the purchase price of stamps or similar charges, as incurred by the seller on behalf of its customers, for mail or parcel delivery through the United States mail, without any additional amounts added to the actual price.
Note: "Postage charges" do not include any charges for mail or parcel delivery by any means other than through the United States mail. The term also does not include any amount representing a "markup" over and above the purchase price of the stamps incurred by the seller.
Example #1: A company has brochures delivered to its customer via a private, third-party delivery service. The company invoices its customer $100 for the brochures and separately states an additional charge of $10 for delivery. The entire invoice of $110 is subject to sales tax.
Example #2: A company has brochures delivered to its customer via the United States Postal Service. The company invoices its customer $100 for the brochures and separately states an additional charge of $10 for delivery. Only $100 of the invoice is subject to sales tax, since postage charges through the United States mail are not subject to tax.
Delivery charges that are incurred on behalf of the seller of tangible personal property continue to fall within the definition of "gross retail income" and are subject to sales tax, regardless of the shipping terms used. However, delivery charges billed and furnished by a third party are exempt.
Example #3: A company purchases a piece of equipment from the manufacturer. The purchasing company hires a trucking company to pick up the piece of equipment at the manufacturer's facility and deliver it to purchaser's location. The shipping charges are not subject to sales tax because they are not included in a retail transaction.
An additional exclusion from the application of sales tax exists for tangible personal property that is sold pursuant to an available exemption. If the item being sold is not subject to sales tax, the delivery charges related to that item also are not subject to sales tax. If some of the items being delivered are exempt and some of the items are subject to sales tax, the delivery charge attributable to the taxable items is subject to tax.
Example #4: An office supply retailer purchases 500 ballpoint pens from a wholesaler for $1,000. The wholesaler charges the retailer $100 to deliver the pens. The retailer issues an exemption certificate to the wholesaler indicating that the pens are being purchased for resale. The entire $1,100 charge is exempt from sales tax.
Example #5: A manufacturer purchases repair parts for its equipment for $1000. Ninety percent of the repair parts are exempt under the manufacturing exemption. The wholesaler charges the retailer $100 to deliver the repair parts and materials. Because ninety percent of the repair parts are exempt, ten percent of the $100 delivery charges is subject to sales tax.
When separately stated, sales tax does not apply to charges for serving or delivering food and food ingredients furnished, prepared, or served for consumption at a location or on equipment provided by a retail merchant. However, charges for delivery of prepared food beyond the seller's location and not served on the seller's equipment are subject to sales tax.
Example #6: A pizza parlor imposes a $3 charge to deliver pizzas to a customer's residence. The $3 delivery charge is subject to sales tax.
Example #7: A merchant caters an event at a location leased by the caterer. As a separate charge on the customer's invoice, the caterer charges the customer $100 for delivering and serving the food. The $100 is not subject to sales tax.
Example #8: A merchant caters an event at a location provided by the customer. As a separate charge on the customer's invoice, the caterer charges the customer $100 for delivering and serving the food. The $100 is subject to sales tax.
While charges to incorporate tangible personal property into a permanent attachment to real property are not subject to sales tax, delivery charges related to construction materials are subject to tax. Contractors that enter into "time-and-materials" contracts are acting as retail merchants with regard to the tangible personal property transferred pursuant to such contracts. Any charges for delivery of tangible personal property included in a time-and-materials contract are subject to sales tax. Contractors that enter into "lump-sum" contracts must pay sales tax or accrue use tax on any delivery charges incurred by the contractor with regard to the tangible personal property transferred pursuant to such contracts.
Example #9: A contractor enters into a time-and-materials contract to replace a driveway. The contractor charges its customer $100 for gravel and $25 to have it delivered to the jobsite. The contractor must collect sales tax on the entire $125 charge.
Example #10: A contractor enters into a lump-sum contract to replace a driveway. The contractor charges its customer a flat fee of $5,000 to replace the driveway. The contractor purchases gravel from the aggregate company for $100, and the aggregate company charges the contractor $25 to deliver the gravel to the jobsite. The contractor must pay sales tax, or accrue use tax if he has given the aggregate company an exemption certificate, on the entire $125 charge.
Transportation companies that purchase tangible personal property for delivery to customers and charge their customers for the tangible personal property will be required to register as retail merchants and collect sales tax on the entire charge for such transactions.
Example #11: A residential customer orders 3 yards of white rock to be delivered from a hauling company. The hauling company proceeds to an aggregate company and purchases 3 yards of white rock that it delivers and dumps at the customer's residence. The hauling company does not mark up the price of the white rock from the price it paid at the aggregate company and adds that amount to its hauling charges. The hauling company is acting as a retail merchant and must collect sales tax on the entire amount it charges its customer for the white rock and delivery regardless of whether the charges are separately stated on the bill.
III. INSTALLATION CHARGES
Separately stated charges for installation that occurs after delivery and transfer of the tangible personal property are not subject to sales tax. Installation charges that are not separately stated from the selling price of an item or the delivery charge for an item are subject to sales tax.
NOTE: Charges made for the preparation, fabrication, alteration, modification, finishing, completion, delivery, or other service performed in respect to the property transferred before its transfer and installation are subject to sales tax, even when separately stated on the invoice, bill of sale, or similar document.
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Posted: 04/01/2020 by Legislative Services Agency
DIN: 20200401-IR-045200169NRA
Composed: May 18,2024 11:41:04AM EDT
A
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