City and County of Denver, Colorado
TAX GUIDE
Topic No. 34
FREIGHT, DELIVERY, AND TRANSPORTATION
Transportation charges paid to the vendor in a single transaction to acquire taxable tangible personal property are subject to Denver sales and use tax. This includes transportation charges billed by the vendor to the purchaser. Freight, delivery, and transportation charges are a component of the total purchase price paid to the vendor. Therefore, transportation charges that appear on the vendor's invoice are generally subject to tax.
The Denver Revised Municipal Code (DRMC) Sections 53-24(15) and 53-95(16) define "purchase price." The applicable part of this definition is as follows:
"Purchase price" or "price" means the aggregate value measured in currency paid or delivered or promised to be paid or delivered in consummation of a sale, without any discount from the price on account of the cost of the property sold, cost of materials used, labor or service cost, transportation or delivery charges, or any other expense whatsoever.... (Emphasis added)
Charges such as delivery service charges, often invoiced as "shipping and handling" charges, are included in the taxable amount.
The freight charges appearing on a vendor's invoice on sales to a Denver customer are subject to Denver's sales/use tax whenever the Denver customer makes a single transaction to acquire personal property inclusive of transportation charges.
Transportation charges which represent hiring someone to transport tangible personal property from point A to point B are not subject to Denver's sales/ use tax when a customer makes a separate transaction solely for transportation of that property.
A vendor may act as an agent for its customer to obtain transportation when (a) the vendor and customer have executed a written document creating a principal-agent relationship and (b) the names of the vendor and customer both appear in the contract with the transportation company.
Because stand-alone transportation is a service upon which the DRMC does not impose sales or use tax, a stand-alone transaction solely for transportation is not taxable.
1. ABC Sales Company takes telephone and mail orders for exercise videotapes. ABC adds $3 per order for shipping and handling to the $35 list price. Even though the $3 is shown as a separate charge for shipping and handling on the invoice, that amount is part of the purchase price and is taxable.
2. XYZ Corporation is a national manufacturing company which purchases replacement parts from various vendors. After the purchase, XYZ then contacts a freight carrier and arranges for the parts to be picked up from the vendors. At the end of the month, the freight carrier bills XYZ for the charges. These charges from the freight company are not taxable because they are not part of the purchase price of the parts.
* DRMC Section 53-24(9),(16). Definitions.
* DRMC Section 53-26(9). Exemptions.
* DRMC Section 53-95(10),(17). Definitions.
THE ABOVE INFORMATION IS A SUMMARY IN LAYMAN'S TERMS OF THE RELEVANT DENVER TAX LAW FOR THIS INDUSTRY OR BUSINESS SEGMENT. IT IS NOT INTENDED FOR LEGAL PURPOSES TO BE SUBSTITUTED FOR THE FULL TEXT OF THE DRMC AND APPLICABLE RULES AND REGULATIONS.
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