LR 8352
Taxability of Freight Charges
April 30, 2025
Dear Applicant:
This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated March 13, 2025.
The facts as presented in your letter ruling request and subsequent phone call are summarized as follows:
Applicant sells tangible personal property and occasionally needs to order additional materials from outside of their inventory. Applicant is charged a fee for freight on these items, which they then add to the charge to their customer as part of the final price of the transaction.
ISSUE 1:
Are Applicant’s charges associated with freight on delivered materials subject to sales tax?
RESPONSE 1:
Yes. Applicant’s charges associated with freight on delivered materials is subject to tax.
Section 144.020.1, RSMo. provides “[t]ax is hereby levied and imposed upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state.”
Missouri Code of State Regulations 12 CSR 10-103.600(1) provides, in relevant part:
The sale of a service is not subject to tax unless a specific statute authorizes the taxation of the service. When a sale involves both tangible personal property and a nontaxable service, the sale of the tangible personal property will be subject to tax, and the service will not be subject to tax, if the sale of each is separate. When the sale of tangible personal property and a nontaxable service are not separable, the entire sale price is taxable if the true object of the transaction is the transfer of tangible personal property. None of the sale price is taxable if the true object of the transaction is the sale of the nontaxable service.
Missouri Code of State Regulations 12 CSR 10-103.600(3)(A) provides:
1. If the purchaser is required to pay for the service as part of the sale price of tangible personal property, the entire sale price is subject to tax.
2. If the purchaser is not required to pay the service charge as part of the sale price of the tangible personal property, the amount paid for the service is not subject to if the charge for such service is separately stated. If the charge for the service is not separately stated, the entire sale price is subject to tax.
Applicant charges its customers for the cost of freight on items they don’t have in inventory, and it is mandatory. Therefore, the charge for the cost of freight is included in the total sales price and is subject to sales tax.
This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.
Should additional information be needed, please contact Associate Counsel J. Ross Shelton, General Counsel’s Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone 573-751-0961), or me.
Sincerely,
Trish Vincent