While tariffs have long played a role in global trade, recent spikes in tariff rates have increased their visibility and their impact on businesses.
In response to rising costs, some companies have begun listing tariff-related surcharges separately on customer invoices. This practice raises an important question: When are these charges subject to sales tax?
The answer varies depending on the state. A critical factor in most jurisdictions is who holds responsibility for paying the tariff. If the seller imports the goods and passes the tariff cost on to the customer, that charge is generally considered part of the taxable sales price. On the other hand, if the buyer is the importer and pays the tariff directly, the cost is often excluded from the sales tax base. Although state guidance is inconsistent, some states have issued specific rules clarifying their approach.
In a 2020 ruling (Rev. Rul. 20-4), South Carolina explained that if the purchaser is the importer and directly pays the tariff, then that tariff cost is not included in the gross proceeds or sales price used to calculate sales and use tax. The transaction with the seller and the tariff payment to the federal government are treated as separate.
However, when the seller is the importer and either includes the tariff in the item price or separately states it on the invoice, the cost is included in the taxable amount—unless the product itself is exempt from tax.
In May, New Jersey clarified its treatment of tariff-related fees, stating that charges passed to consumers are taxable, even if shown as separate line items. For example, if a tariff is levied on imported furniture and the seller increases prices to cover that cost, the full sales price—including the separately stated tariff amount—is subject to sales tax.
Whether or not a tariff is included in a state's sales tax base depends largely on who is responsible for importing the goods. In states like South Carolina, that distinction can change whether the surcharge is taxable. In others, such as New Jersey, any charge passed to the customer becomes taxable, regardless of how it’s labeled.
Given the patchwork of state-level rules, companies must pay close attention to their invoicing practices and import responsibilities. Doing so not only ensures compliance—it also offers an opportunity to optimize tax exposure, particularly for large purchases.
At Wei, Wei & Co., LLP, we help businesses understand how tax laws—including those affecting tariffs and sales tax—impact their financial operations. Our team provides strategic insight to help companies manage tax liabilities and remain compliant with evolving regulations.
If your business is navigating complex tax exposure related to tariffs, our professionals are here to help you evaluate options and reduce risk.
1. Are tariff surcharges subject to sales tax?
Short answer: It depends on your state and who pays the tariff.
Detail: In most jurisdictions, if the seller is the importer and recoups the tariff cost from the customer—whether built into the price or shown as a separate line item—that amount becomes part of the taxable sales price. If the buyer is the importer of record and pays the tariff directly to U.S. Customs, the fee is typically excluded from the sales-tax base.
2. Does separately stating a tariff fee on an invoice avoid sales tax?
No. States such as New Jersey have clarified that listing tariff charges separately does not remove them from the taxable price when the seller passes the cost to the customer.
3. How does South Carolina treat sales tax on tariffs?
South Carolina Rev. Rul. 20-4 explains that tariff costs are excluded from sales tax only when the purchaser is the importer of record and pays the tariff directly. When the seller is the importer, any tariff charge—separately stated or included in the price—remains taxable.
4. What is an “importer of record,” and why does it matter for sales tax?
The importer of record is the party legally responsible for clearing goods through customs and paying all associated duties and tariffs. Being the importer of record can shift the tariff cost away from the taxable sales price, potentially lowering the buyer’s sales-tax liability.
5. Are there strategies to minimize sales-tax exposure on tariffs?
Businesses often evaluate whether to become the importer of record for large purchases, use accurate item classifications, and review state-specific guidance. Consulting a multistate tax advisor can uncover additional planning opportunities.
6. Do all states follow the same rules on tariff and sales-tax treatment?
No. Sales-tax statutes vary widely. Some states have published formal guidance (e.g., South Carolina, New Jersey), while others remain silent. Companies must track each state’s rules where they ship or store inventory.