Rule 13. - Computation of tax; transportation charges.

Whether or not freight, delivery or transportation charges may be deducted by the seller from the selling price in computing the sales tax does not depend upon the separate billing thereof, but depends upon whether or not the services rendered by the transporting agency are rendered to the seller or the purchaser.

If the seller contracts to deliver tangible personal property to some designated place, or is obligated to pay transportation charges to some designated place, the transportation services are rendered to the seller, and the transportation charges must be included in the selling price for the purposes of computing the sales tax. If the seller contracts to sell tangible personal property f.o.b. origin, title passing at that point, and the purchaser pays the transportation charges, then the transportation services are rendered to the purchaser, and the transportation charges are not to be included in the selling price. These principles apply whether or not the transportation charges are separately billed.

For example, where an automobile dealer sells an automobile from his stock, and title thereto passes to the purchaser for use or consumption at the dealer's place of business, no deduction may be made for freight charges incurred in bringing the automobile from the factory to the dealer's place of business even if the automobile is sold and billed to the consumer on the basis of factory list price plus freight and other charges. Similarly, a person selling lumber for use or consumption may not deduct from the selling price, any freight or delivery charges accruing on account of the transportation of the lumber to his yard or warehouse. Likewise, he may make no deduction for such charges for transportation from his yard or warehouse to his customer, if under the contract of sale he is obligated to deliver the lumber to his customer at a designated place.

In all cases the determining factor is the place where title to the property passes to the user or consumer, and any freight, delivery, or other transportation charges incurred and paid by the seller for the purpose of transporting such property to such place are a part of the selling price for the purposes of computing sales tax.

Where property is sold on terms whereunder the seller agrees to deliver such property to a certain place, but the purchaser pays the freight and deducts it from the seller's invoice price of the goods in making remittance to the seller for the goods, the transportation charges are deemed a part of the selling price of the property for the purposes of computing sales tax.

This rule applies only to Sales Tax and not to Use Tax.