Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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557.0000 TRANSPORTATION CHARGES—Regulation 1628

Annotation 557.0603

557.0603 Title Clause on Shipping Document. Taxpayer sells small copiers, plotters, and consumables to end users, mainly within a 30-mile radius of its warehouse. The customers have a choice for transportation from the taxpayer's warehouse to their location. They can ask the taxpayer to ship by a third-party carrier, pick up the property themselves, or have the taxpayer deliver the product in its own truck. If the taxpayer delivers, a separate nominal charge is added on the invoice. Transportation is to occur after the sale of the property is made to the purchaser and is separately stated on the delivery invoice. The taxpayer asks if any or all of the following four clauses on the shipping document would be acceptable to the Board as a title clause for purposes of excluding its transportation charges from sales tax.

(1) Title: passes FOB warehouse.

(2) Title: passes prior to shipment.

(3) Title: to buyer FOB warehouse.

(4) Title: to buyer prior to shipment.

Clause 2 and Clause 4 will accomplish taxpayer's purpose. Only Clause 2 and Clause 4 establish that title passes to buyer when delivery is made by taxpayer's own trucks. The FOB clauses are sufficient to pass title when delivery is by a third-party carrier, but they are not sufficient when delivery is by the taxpayer's own trucks. In order to accurately reflect the agreement between the taxpayer and its buyers that title is to pass to the buyer prior to shipment in all cases, the taxpayer should use Clause 2 or Clause 4. Clause 4 is preferable because it is more explicit. 5/15/97.