Is Shipping Subject to Sales Taxes in Illinois?

The state of Illinois states their position in a general information letter published in 2010.  The following is pulled from that letter:
“As noted in subsection (d) of Section 130.415 of the Department’s regulations, if the seller and the buyer agree upon the transportation or delivery charges separately from the selling price of the tangible personal property which is sold, then the cost of the transportation or delivery service is not a part of the “selling price” of the tangible personal property personal property which is sold, but instead is a service charge, separately contracted for, and need not be included in the figure upon which the seller computes his or her tax liability. A separate listing on an invoice of such charges is not sufficient to demonstrate a separate agreement.
The best evidence that transportation or delivery charges were agreed to separately and apart from the selling price is a separate and distinct contract for transportation or delivery. However, documentation which demonstrates that the purchaser had the option of taking delivery of the property, at the seller’s location, for the agreed purchase price, or having delivery made by the seller for the agreed purchase price, plus an ascertained or ascertainable delivery charge, will suffice.”
In practical terms if you allow your customer to pick-up the item at your location, then you do not have to charge sales tax.  If you do not, you most likely will have to charge the tax on your shipping and handling charges.
If you have any questions, please consult with your local certified public accountant.
Written by Michael Ericksen
WAC Solution Partners- Midwest