A friend of mine called me up last week and asked “is freight taxable in the State of Nevada”?
We both kind of thought about it and came to the same conclusion. That freight is a service so how could it be taxable? Well, my friends called me on these questions for one reason they all know that if I am unsure of the answer, I will start researching to find the answer. After, some quick clicks of the mouse and some reading, this is what I found:
In the July 2003 State Tax Notes (Link: http://tax.state.nv.us/documents/ntn072003.pdf ) the state announced that the Nevada Tax Commission adopted a permanent regulation regarding the taxability of freight. From the article, sales tax must be collected when a retailer charges customer freight for the sale of tangible personal property. The one exception and this exception has two conditions that must be met; first, the freight must be stated separately on the invoice and second, the customer accepts title to the property before the retailer/common carrier physically deliver the property to the customer.
If you think you can us this exception to get out of the sales tax on freight, think again. The regulation requires that a written agreement be executed between the retailer and the customer for this exception to apply. I called around to some of the people still working in public accounting and they have seen some of the bills from this oversight cost in the ballpark of $20,000.
