An estimated 103 million Americans are anticipated to travel this holiday season, according to AAA Newsroom. While some travelers will set forth with gifts in tow, others may have arranged for items to be delivered separately and some may be lucky enough to receive packages at home. During the holiday season, people and goods are in motion, both interstate and intrastate. Unlike interstate travel, sales tax on intrastate travel and transportation services might cut into your holiday travel budget.
On the one hand, only a small handful of states tax intrastate passenger transportation services. On the other hand, many states tax charges for transporting goods. However, a 1992 U.S. Supreme Court decision, Quill v. North Dakota, has limited states from capturing tax revenue on charges for goods purchased and transported interstate due to constitutional restrictions on their ability to require remote sellers to collect and remit sales tax.
Georgia, for example, imposes sales tax on charges to transport passengers by air, rail, water and car between two points within the state. Further, shipping and handling and delivery charges are generally taxable if the charges are part of a sales transaction.
Similarly, Oklahoma imposes sales tax on a receipts derived by common carriers, taxi companies, airlines and other similar service providers transporting passengers within the state. Unlike Georgia, however, Oklahoma does not impose sales tax on transportation, shipping, postage and handling charges associated with transporting property as long as these charges are separately stated on the consumer’s bill or invoice.
In Ohio, sales tax is imposed on services to transport persons within the state by air and motor vehicle, but if the traveler is commuting by train or water vessel, the service is not taxable. Shipping and delivery charges for intrastate shipping of goods, on the other hand, are taxable in Ohio, regardless of the means by which they are delivered or whether they are separately stated on the consumer’s bill or invoice.
The changing landscape of the retail world and the current limitations on state tax collection authority may encourage states to look more closely at taxing intrastate passenger transportation services to recover some of the lost revenue from remote sales. In the meantime, may you (and your packages) travel safely this season.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Are your state’s holiday deliveries and transportation services subject to sales tax?
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