Thursday, July 07, 2005

FAQ: Are fuel surcharges taxable?

FAQ: Are fuel surcharges taxable?

I'm in a state where delivery charges by the vendor on a taxable sale are taxable. In other words, delivery charges are "included in the basis of the tax." What if the vendor adds on a fuel surcharge?

I'd say it's taxable. A fuel surcharge is just an additional delivery charge, broken out separately because it's temporary. But it's still part of the charge for delivery and therefore it's probably taxable.


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Stonehenge Property Management said...

I'm inclined to think that fuel surcharges are not sales taxable. First, they are a reimbursement of the trigger price and the pump price, and a reimbursement is not a delivery charge or revenue. Second, a fuel surcharge could be considered a quasi-fuel sale, again because you are reimbursing them for fuel purchased at a high price. Fuel sales are not sales-taxable, they have federal and state motor fuel tax build into the pump price already.

Jim Frazier said...

It depends on whether the fuel surcharge is to reimburse the vendor for their inbound freight costs. If that's the case, the surcharge would be taxable, unquestionably (assuming the sale is taxable).

If it's to compensate for additional costs of freight from the vendor to the buyer, than it may depend on whether or not freight charges are taxable on a taxable sale. In most states, they are. Therefore, in most states, surcharges would be taxable.

At best, they'd follow the taxability of freight charges.

Anonymous said...

Can you charge fuel surcharge on tax as it is part of the transportation cost?

Jim Frazier said...

I'm not really sure I understand your question. Frankly, the issue of this article is whether fuel surcharges are taxable. What the seller can use to calculate the surcharge is kind of up to negotiation between the seller and the buyer.

Its me said...

I have a question in the state of Nevada when I pay my rent at a weekly hotel they charge me resort fee hotel tax 11 percent which is fine but some hotels every time you make a payment the charge you a surçharcge fee of $10.95 and they tax you 11% on the surcharge is that legal? To tax a surcharge???

Jim Frazier said...

Frankly, not really an expert on lodging taxes - often separate from sales taxes. Ask the hotel why the surcharge is there. And check NV's web site to see if there are any publications or bulletins on the subject.

Anonymous said...

Can tax be added to a Fuel Surcharge for the use of a crane used on a tax exempt job? I know that tax has to be added to the crane rental as all rentals are taxable (at least in NY)but I am unsure about the Fuel Surcharge.

Jim Frazier said...

Surcharges are usually simply extra charges that sellers add to the price without having to actually raise the price. Fuel surcharges, drop ship surcharges, etc. are examples. Since they're really part of the price (just labeled differently), then they're part of the taxable amount.

In this case the question is what the fuel surcharge is for. If they're charging you for the fuel inside the crane, and consumables are taxable in your state, then the surcharge is taxable. Ditto if delivery charges are taxable in your state.