The Louisiana Department of Revenue (“LDR”) has issued Revenue Information Bulletin (RIB) No. 25-025 providing clarification on how state and local sales and use taxes apply to transportation charges, including shipping, freight, and delivery costs, in transactions involving tangible personal property, digital products, leases and rentals, and taxable services. This comes after the legislature expanded the sales tax base to include certain transportation charges during the 2024 Third Extraordinary Session of the Louisiana Legislature, which took effect on January 1, 2025.
Under Louisiana law, the definitions of both “cost price” and “sales price” include transportation charges. As a result, delivery or freight fees charged by a seller for transporting taxable tangible personal property or digital products are subject to sales tax, regardless of whether those charges are separately itemized or included in the total price. Therefore, sellers that provide delivery as part of a sale must treat those charges as part of the taxable base unless a specific exemption or exclusion applies.
Transportation charges follow the tax treatment of the underlying transaction. If the sale itself is exempt or excluded from sales tax, such as a sale for resale or a purchase of qualifying manufacturing machinery and equipment, then the associated transportation charges are also excluded or exempt. For instance, a delivery charge on a sale of equipment to a Louisiana state agency (exempt under La. R.S. 47:305.7(A)(1)(a)) is likewise exempt.
When a single invoice includes both taxable and non-taxable items and only one transportation charge is applied, the entire transportation charge is taxable if any portion of the invoice relates to a sale that is subject to sales and use tax. Sellers who separately invoice or itemize delivery charges associated with exempt or excluded sales to avoid tax on a mixed transaction may not avoid tax by improperly allocating delivery costs to non-taxable invoices.
The taxability of transportation charges also depends on who arranges the delivery. If the purchaser contracts directly with a third-party carrier for shipment, those charges are not taxable. Similarly, no tax applies if the seller hires a third-party carrier but does not charge the purchaser for delivery. However, if the seller passes through third-party delivery charges to the customer, those amounts are deemed part of the sales price and are subject to tax.
In contrast to sales transactions, Louisiana’s sales tax on leases and rentals applies to the “gross proceeds derived from the lease or rental.” Transportation or delivery charges are not included in gross proceeds, meaning separately stated delivery fees on leased or rented property are not taxable. Likewise, for taxable services, sales tax applies only to the amount paid for the service itself. Therefore, separately stated delivery or transportation charges related to the service are not taxable. For further updates regarding this topic, contact Liskow attorneys Bob Angelico, Leon Rittenberg III, Caroline Lafourcade, and Kevin Naccari, Jr. and visit our Tax practice page.