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My company has an order that was charged sales tax on the packing charges. It was furniture shipped to Florida. My question is, are packing charges included in sales tax?
ANSWER
Expert Carlton Melton's Answer:
Whether or not sales tax is to be paid on the packing charges depends upon how the items were invoiced. If the invoice includes a separately itemized charge for packaging materials, then that amount is included as part of the sales price of the goods purchased, and is taxable. Florida Technical Assistance Advisement (TAA) 12A-1.040 Section (7) states:
(7) CHARGES FOR PACKAGING MATERIALS. When charges for packaging materials are separately itemized from the sales price of tangible personal property on the customer’s bill, invoice, or other tangible evidence of sale, the charge for packaging materials is a part of the sales price of the tangible personal property.
However, if the invoice is not itemized in this way, then the amounts for packaging are tax exempt per Sections 1 & 2 of the same TAA. Below is the text of those sections:
12A-1.040 Containers and Other Packaging Materials; Gift Wrapping.
(1) SCOPE. This rule provides when items intended to accompany a product for sale are not subject to tax. Materials, containers, labels, sacks, bags, or similar items intended to accompany a product for sale are not subject to tax under the requirements provided in Section 212.02(14)(c), F.S., as outlined below.
(2) MATERIALS USED FOR PACKAGING PROPERTY FOR SALE.
(a) The sale, use, storage, or consumption of materials, containers, labels, sacks, bags, or similar items that are intended to accompany a product sold to a customer and to be used one time only for packaging tangible personal property for sale is not subject to tax when: 1. Delivery of the product would be impracticable because of the character of the contents; or 2. Such items are used for the convenience of the customer.
(b) The sale, use, storage, or consumption of materials, containers, labels, sacks, bags, or similar items used for packaging in the process of providing a service subject to tax under Chapter 212, F.S., is not subject to tax.
(c) Dealers who are registered with the Department may purchase materials, containers, labels, sacks, bags, or similar items intended to be used in the manner provided in paragraph (a) or(b) tax-exempt by issuing a copy of the dealer’s Annual Resale Certificate to the selling dealer at the time of purchase, as provided in Rule 12A-1.039, F.A.C. Persons who are not required to register with the Department as a dealer under Section 212.18(3), F.S., must extend an exemption certificate to purchase such items tax-exempt. A suggested exemption certificate is provided in subsection (5) of Rule 12A-1.038, F.A.C.
(d) The following is a non-exhaustive list of materials that, when used as provided in paragraph (a) or (b), are not subject to tax:
1. Containers, such as bags, barrels, baskets, bottles, boxes, cans, carboys, cartons, cases, crates, cylinders, drums, kegs, pallets, racks, reels, sacks, skids, or spools.
2. Items used inside containers and packages to shape, stabilize, and protect the contents of the packaged tangible personal property, such as bubble wrap, excelsior, preservative materials, wax paper, wrapping papers, or waste paper.
3. Materials used to close or otherwise secure the containers, such as binding materials, carboys, cartons, cellophane, coating materials, cores, crates, glue, gummed tape, staples, strapping, string, tape, twine, wrapping paper, wire, or wire bands.
4. Materials used to provide instructions regarding the shipping of the container, such as gummed labels or tags.
(e) The sale, purchase, use, storage, or consumption of dunnage is subject to tax at the time of purchase. Dunnage is not delivered to the purchaser with the package and its contents, and it is retained by the transporter or shipper. “Dunnage” includes items that are used by the transporter or shipper under, outside, and between packages to protect the packages and their contents from damage, motion, shock, or breakage while being transported or delivered to the purchaser. Examples of dunnage are blocks, lumber, and other materials used for bracing, blocking, skidding, shoring, holding, or protecting cargo during transport.
(f) Examples:
1. Toothpaste may be sold at retail in a tube enclosed in a box. The tube of toothpaste is placed in a box that will accompany the toothpaste when sold to the consumer. Multiple units of boxes are placed in shipping containers by the manufacturer. Labels are placed on the shipping containers identifying the product and providing shipping instructions. The manufacturer then places the labeled boxes on a pallet and covers them with shrink-wrap for shipment. The pallets are not returnable to the manufacturer when the toothpaste arrives at its destination. The toothpaste manufacturer may purchase the tubing materials, boxes, shipping containers, labels, pallets, and shrink-wrap tax-exempt.
2. Coat hangers and garment covers that are delivered with the clothing to the purchaser are packaging materials that accompany the product sold to the customer. However, coat hangers and garment covers used on display racks in stores that are retained by the store do not accompany the clothing to the customer are subject to tax.
