Yes, freight charges are taxable in Kentucky whenever the goods being shipped are taxable. Kentucky’s 6% sales tax applies to delivery charges as part of the “sales price,” and it makes no difference whether shipping appears as a separate line on the invoice or is folded into the product price.1Kentucky Department of Revenue. Sales Tax Facts – June 2004 This has been the rule since July 1, 2004, when Kentucky conformed its tax code to the Streamlined Sales and Use Tax Agreement.
When Shipping Is Taxable
If the product is taxable, the freight is taxable at the same 6% rate. Kentucky imposes sales tax on retail sales of tangible personal property and digital property delivered in the state,2FindLaw. Kentucky Revised Statutes 139.200 and the definition of sales price pulls in transportation, shipping, postage, handling, crating, and packing charged by the retailer.3Justia. Kentucky Code 139.010 – Definitions for Chapter
It doesn’t matter how the goods move. Own trucks, UPS, FedEx, USPS. As long as the seller is the party responsible for getting the item to the buyer, the delivery charge rides with the sale. The Department of Revenue has stated that delivery charges on taxable goods are taxable “regardless of how the delivery charges are billed.”1Kentucky Department of Revenue. Sales Tax Facts – June 2004 Separately stating shipping on the invoice does not exempt it.
Handling charges are always taxable when attached to a taxable sale. Combining shipping and handling into a single line makes the full combined amount taxable.
When Shipping Is Not Taxable
Delivery charges follow the tax status of the underlying product. When the goods themselves are exempt, so is the freight to deliver them. Kentucky’s guidance identifies several situations:1Kentucky Department of Revenue. Sales Tax Facts – June 2004
- Exempt goods, such as prescription drugs, prosthetic devices, and school textbooks. Shipping on those items is exempt too.4Justia. Kentucky Code 139.472 – Exemption for Certain Medical Items
- Food and food ingredients purchased for home consumption (not prepared food), which are exempt from Kentucky sales tax along with their delivery charges.5Kentucky Department of Revenue. Sales Tax Facts – December 2021
- Sales for resale, when the buyer furnishes a valid resale certificate. Kentucky accepts Form 51A105, the Streamlined Sales Tax exemption certificate (Form 51A260), or the Multistate Tax Commission’s uniform certificate.6Cornell Law Institute. 103 KAR 31:111 – Sales and Purchases for Resale
- Deliveries to customers outside Kentucky, as long as the buyer does not take possession of the goods inside Kentucky before they leave the state.
Mixed Shipments Are a Trap
When one delivery charge covers a shipment containing both taxable and exempt items, Kentucky taxes the entire delivery charge. The statute has no provision for allocating freight between the taxable and nontaxable portions.1Kentucky Department of Revenue. Sales Tax Facts – June 2004
A distributor sending taxable supplies and exempt items on the same invoice with one shipping line owes tax on the whole charge. The only way around it is to ship the two categories separately with their own delivery charges. Businesses that routinely fulfill mixed orders should configure their invoicing to reflect that, because auditors do check.
The Independent Carrier Exception
Kentucky recognizes one narrow exception. When the buyer independently hires a third-party carrier to pick up the goods and the carrier bills the buyer directly, the delivery charge is not part of the sales price and is not taxable. The buyer has to choose and contract with the carrier. The seller cannot arrange it.1Kentucky Department of Revenue. Sales Tax Facts – June 2004
The Department of Revenue has also addressed a common workaround. If a seller sets up a separate transportation company with exclusive rights to deliver its own products, those delivery charges are still treated as a condition of the sale and remain taxable. For the exception to apply, the buyer must have a genuine option to hire someone else.1Kentucky Department of Revenue. Sales Tax Facts – June 2004
The exception does not cover a seller arranging UPS, FedEx, or any other common carrier on the buyer’s behalf, even when the carrier’s fee appears separately on the invoice. If the seller is responsible for the delivery, the charge is taxable no matter who physically moves the goods.
Out-of-State Sellers Shipping Into Kentucky
Remote sellers have to register and collect Kentucky sales and use tax once they had either $100,000 or more in gross receipts from Kentucky sales, or 200 or more separate Kentucky sales, in the previous or current calendar year.7Kentucky Department of Revenue. Kentucky Sales and Use Tax Collections by Remote Retailers Once either threshold is crossed, the remote seller collects the 6% tax on the full sales price of taxable goods shipped into Kentucky, freight included. The mixed-shipment rule and the exempt-product rules apply the same way they would to a Kentucky-based retailer.
What Getting It Wrong Costs
Under-collecting freight tax adds up fast for high-volume shippers, and Kentucky’s penalty structure stacks:
- Late filing: 2% of the tax due for each 30-day period (or partial period) a return is late, up to 20%.
- Failure to file: 5% of the estimated tax due for each 30-day period the return is unfiled, up to 50%, with a $100 minimum.
- Interest: 9% annual interest on unpaid sales tax balances for 2026.8Kentucky Department of Revenue. Penalties, Interest and Fees
The penalties run against the full uncollected amount, which includes tax that should have been charged on delivery. A retailer that taxes its products correctly but forgets freight across thousands of invoices can face a real assessment when an auditor arrives. Checking that your invoicing system taxes shipping at the same rate as the underlying goods is one of the simplest ways to close that exposure.