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TR 21: Freight, Delivery and Transportation Charges

Transportation or delivery charges are subject to Boulder sales/use tax. This includes, but is not limited to, freight, delivery charges, UPS charges and other like charges to transport tangible personal property. When other charges are not separately stated on the invoice and are commingled with delivery charges, such as set-up and handling charges, they would also be subject to sales/use tax. The Code includes these charges in the definition of "Price" or " purchase price" at section 3-1-1, BRC, 1981: "(5) Installation and wheeling in charges included in the purchase price and not separately stated. (6) Transportation and other charges to effect delivery of tangible personal property to the purchaser."

The freight charges are considered a part of the negotiated purchase price to the vendor. Therefore, freight, delivery or transportation charges billed by the vendor are subject to sales/use tax.

A contract between a delivery company and the purchaser of tangible personal property would be exempt from sales/use tax, provided that the purchaser pays the delivery company directly and the delivery charges do not appear on the seller's invoice. The freight charges would not be considered part of the negotiated purchase price. This would be considered a non-taxable service contract.


  1. An industrial supply house purchases a case of cleaning fluid for resale from a vendor and a case of floor wax to clean the supply house floors from another vendor. The inventory invoice includes freight charges of $5.00 and the floor wax invoice includes shipping and handling charges of $5.00 and separately states wheeling-in charges of $2.00. The $5.00 freight charge for the inventory would not be taxable, because the purchase of the inventory is exempt from sales/use tax based on the wholesale exemption (subsection 3-2-6(f), BRC, 1981). The $5.00 shipping and handling charges for the floor wax would be taxable, but the wheeling-in charge would be exempt, because it is separately stated.
  2. A manufacturing company purchases a piece of equipment from a vendor and then contracts with a freight company to pick-up the equipment from the vendor and deliver it to the manufacturing company. The freight company bills the manufacturing company $120.00 for delivery. The freight charges are not part of the negotiated purchase price with the vendor of the equipment, and, therefore, would not be subject to sales/use tax.