Charges for Deliveries Made by Common Carrier Taxable in Alabama

In an administrative law decision, a taxpayer’s charges for deliveries made by common carrier were determined to be taxable. The Taxpayer charged its customers a delivery fee on the sand, gravel, and similar products that it sells. The common carrier used by the Taxpayer to deliver the goods is also owned by the same individuals. Alabama law provides that a common carrier is deemed to be the agent of the seller. Consequently, if goods are delivered by common carrier, the sale is not closed until the common carrier finishes delivery of the goods to the customer. Therefore, the delivery charges are a part of the sale and subject to Alabama sales and use tax. However, the law further provides that transportation charges paid to a common carrier are not a part of the taxable selling price if billed as a separate item to and paid by the purchaser. The Court ruled that in this case, the common carrier was clearly acting as agent for the Taxpayer when it delivered the goods to the Taxpayer’s customers and as such, the delivery fees charged by the Taxpayer constituted a part of the sales subject to tax. The exception noted also does not apply because while the Taxpayer billed the transportation charges to its customers as a separate item, the Taxpayer did not pay the common carrier for hauling the goods. (Alabama Rock, LLC v. Alabama Department of Revenue, Alabama Department of Revenue, Administrative Law Decision, No. S. 09-255, September 11, 2009)

Posted on October 19, 2009