The transport of people and products often has varying considerations when it comes to state sales tax implications. Sales tax is assessed on some items, but not others. The summary outlined below covers some of the more typical items in general commerce involving the transportation industry.
Transportation Sales Tax Considerations
Passenger Transportation Services
Companies performing services within the transportation industry are afforded a number of tax-favorable benefits. One of which is a specific exemption related to passenger transportation. Passenger transportation services transport people to places. Under Minnesota Statutes 297B.03 and 297A.90, fees charged to transport passengers are not taxable for Minnesota sales tax purposes.
A person who is engaged in for-hire transportation of passengers by motor vehicle may register as a retailer, however, an exemption is available that limits their potential sales tax exposure.
Examples of exemptions for passenger transportation include the following:
- Light rail
- Taxicab and rideshare services
Parking & Transportation Services
When parking and transportation services are sold together for one combined fee, the entire sale is subject to sales tax even though the transportation by itself is a nontaxable service. When sold together, the transportation service is taxable because it is necessary to complete the sale of the parking service.
Common Carrier Services
Common carriers are hired to transport goods from point A to point B. The fees charged to provide these services are generally not taxable. Common carriers often transport goods by air, ship, tractor-trailer, train, and/or truck. However, the transport of aggregate materials (i.e. gravel, concrete, asphalt, etc.) may still have sales tax consequences.
Delivery charges are charged by the seller for preparation and delivery of personal property or services to a location designated by the purchaser, including, but not limited to, transportation, shipping, postage, handling, crating, and packing.
If the item being sold is taxable, charges by the seller to deliver it would also be taxable. Delivery charges are part of the sale price of the item, even if separately stated. Delivery services furnished and billed by a third party are not taxable except when delivering aggregate materials or concrete blocks.
Transportation has been a key practice area of Smith Schafer’s for more than 50 years. For more information on tax strategies that may benefit your transportation business, contact the Smith Schafer Transportation Team. We look forward to speaking with you soon.