Freight is taxable in North Carolina whenever the item being shipped is taxable. The state’s sales tax statute defines “sales price” to include delivery charges, so a seller shipping a taxable product has to collect sales tax on the shipping fee at the same rate as the product itself. If the goods are exempt, the delivery charge rides along with that exemption.
Why Delivery Charges Count as Part of the Sale
North Carolina defines the sales price of an item as the total consideration paid for it, and delivery charges are specifically listed as part of that total.1North Carolina Department of Revenue. SUPLR 2019-0002 – Fee Part of Sales Price It doesn’t matter whether a retailer breaks shipping out on a separate line or folds it into the product price. Either way, it’s part of the taxable base.
The statute defines delivery charges as amounts imposed by the retailer for preparation and delivery of an item to a location the customer designates.2North Carolina Department of Revenue. SUPLR 2020-0002 – Bundled Membership Transaction That covers standard ground shipping, expedited freight, postage, and any other transportation fee the seller tacks on. Sell a $500 appliance with a $50 delivery charge, and sales tax applies to the full $550.
The state rate is 4.75%, with local and transit taxes stacked on top. Most counties sit at 6.75% or 7%, and Durham County reaches 7.5%.3NCDOR. Current Sales and Use Tax Rates Whatever the combined rate is where the item is delivered, it applies to the shipping charge too.
Handling and Installation Work the Same Way
The Department of Revenue treats shipping, handling, transportation, and delivery charges identically when they’re tied to the sale of a taxable item.4NCDOR. Frequently Asked Questions About Use Tax A combined “shipping and handling” fee is fully taxable, and so is a separately listed handling charge.
Installation charges are also written into the statute as part of the sales price, and they stay taxable even when invoiced separately.5NCDOR. Repair, Maintenance, and Installation Services A furniture store that delivers and assembles a bookshelf charges tax on the product, the delivery, and the assembly fee.
When Shipping Is Not Taxed
The tax status of freight follows the tax status of the goods. If the item is exempt, the delivery charge is exempt too. Prescription medications, certain farm equipment used in commercial production, and other statutorily exempted goods carry no sales tax on either the product or the shipping.
Organizations that qualify for a sales tax exemption use Form E-595E, the Streamlined Sales and Use Tax Certificate of Exemption, when they buy.6NCDOR. Form E-595E Streamlined Sales and Use Tax Certificate of Exemption When a qualifying buyer gives this certificate to a vendor, the seller shouldn’t charge tax on the goods or the delivery. Sellers need to keep the certificate on file to justify the uncollected tax if the Department of Revenue asks.
Shipments With Both Taxable and Exempt Items
A single shipment that mixes taxable and exempt products needs the delivery charge split between them rather than taxed in full. A restaurant supply order might include taxable kitchen gadgets alongside exempt food ingredients in the same box.
The Department of Revenue expects retailers to use a reasonable, consistent allocation. Common methods include splitting the delivery charge by each category’s share of the total sales price, or by its share of the shipment weight. Pick a method, stick with it, and keep records showing how the split was calculated. A retailer that can’t demonstrate a reasonable allocation may be required to collect tax on the entire delivery charge.2North Carolina Department of Revenue. SUPLR 2020-0002 – Bundled Membership Transaction
Arranging Your Own Carrier
The tax picture changes when the buyer hires transportation independently instead of paying the seller for delivery. Contract directly with UPS, FedEx, or a local freight company, and that payment goes to a third party that isn’t selling you the goods. Because the statutory definition of delivery charges only reaches amounts “imposed by the retailer,” a fee paid to a separate carrier doesn’t fold into the sales price.
This matters most on high-value or heavy freight where shipping is a serious line item. A manufacturer buying a $20,000 piece of equipment can save real tax dollars by hiring its own trucking company rather than paying the seller’s delivery fee. The equipment purchase is still taxable unless it qualifies for an exemption, but the separately contracted transportation sits outside the sales tax calculation.
Out-of-State Sellers Shipping Into North Carolina
A remote seller has to register and collect North Carolina sales tax once its gross sales sourced to the state cross $100,000 in the current or previous calendar year.7NCDOR. Remote Sales North Carolina dropped its separate transaction-count threshold in mid-2024, so only the dollar figure matters now. Marketplace sales count toward the $100,000, so a seller with $60,000 in direct sales and $40,000 through a marketplace is already over.
Once registered, the remote seller collects North Carolina sales tax on taxable items shipped into the state, and that collection includes the delivery charges attached to those items.8NCDOR. Sales and Use Tax Registration If a buyer in North Carolina orders from an out-of-state seller that doesn’t collect the tax, the buyer owes use tax on both the item and any delivery charges the seller imposed.4NCDOR. Frequently Asked Questions About Use Tax
What Happens if You Don’t Collect It
North Carolina imposes a 5% penalty on any sales tax not paid when due. If returns are also late, the state adds a separate penalty of 5% of the unpaid tax for each month the return is overdue, capped at 25%.9North Carolina General Assembly. North Carolina Code 105-236 – Penalties and Situs of Violations Interest runs on top of both.
The exposure is largest for businesses that leave delivery charges out of their tax calculation as a matter of practice. An audit totals the undercollected tax across every transaction in the period, and penalties apply to the aggregate. For a retailer processing hundreds of shipments a month, a small per-order oversight compounds quickly. Keeping shipping in the taxable base from the start is cheaper than defending an allocation method you never wrote down.