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Navigating Tax-Deductible Shipping Expenses For Your Business

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Navigating Tax-Deductible Shipping Expenses For Your Business

In the world of business, every dollar counts, and savvy entrepreneurs know that even the costs of shipping can be transformed into valuable tax deductions. The often-overlooked realm of shipping expenses offers deductions for those who know where to look. Imagine recovering a portion of those delivery bills, postage fees and courier charges as legitimate tax deductions – it's like getting a discount on your shipping costs. Whether you're a small e-commerce business shipping products to customers across the country, a growing enterprise restocking inventory or a solopreneur mailing important documents, understanding the nuances of tax-deductible shipping expenses can make a significant difference come tax season. In this guide, we'll cover everything related to tax-deductible shipping expenses and answer questions like can you write off shipping costs, how much does shipping cost for a small business and do you pay taxes on shipping. Get ready to discover how to ship your business products and materials while simultaneously lightening the load on your tax bill.

Table of contents

Key takeaways...Read more

What are business shipping costs?...Read more

What shipping materials are tax deductible?...Read more

When are business shipping expenses tax-deductible?...Read more

Do you pay tax on shipping costs?...Read more

How do you report shipping costs?...Read more

What if I sell and ship items through Poshmark?...Read more

Poshmark and taxes...Read more

When does Poshmark send 1099 tax forms?...Read more

Key takeaways

  • Shipping expenses are tax-deductible for businesses as long as they’re related to your business activities.
  • Some states charge sales tax on shipping and handling costs.
  • If you're a seller on Poshmark, there are certain regulations when it comes to shipping.

What are business shipping costs?

From packages crisscrossing the nation to international shipments spanning continents, the shipping costs you incur in the course of business operations can often be reclaimed as a part of your overall 1099 tax strategy. Business shipping costs typically include any costs related to transporting your company's products, materials or documents to various destinations. The specific elements of these costs can vary significantly based on your company's size, industry and operational requirements, but all contribute to the overall expenses of getting your goods from one place to another efficiently and securely.
Infographic entitled Shipping Delivery Services listing the different types of delivery services covered under the business shipping tax deduction.
You have the freedom to choose how and when to ship your business goods. With many different courier services available, it’s best to choose the one that fits your specific needs. Some things to consider when choosing a courier service include:
  • Shipping costs
  • Speed of service
  • Insurance coverage
  • Signature upon delivery
  • Reliability
  • Tracking and communication
  • Special services
  • Coverage area
  • Ease of use
When you consider these factors, you’ll be sure to choose a courier service that aligns with your business needs.

What shipping materials are tax deductible?

Shipping materials that are necessary for your business operations are generally tax-deductible. These materials help you pack, protect and efficiently ship products or documents to customers or clients. Common tax-deductible shipping materials include:
  • Boxes: Any boxes you purchase to package and ship products are typically deductible.
  • Envelopes: Envelopes of various sizes used for mailing documents or smaller items.
  • Packaging tape: The tape used to seal boxes and envelopes securely.
  • Bubble wrap and packing peanuts: Materials used for cushioning and protecting fragile items during shipping.
  • Packing paper: Used for wrapping and protecting items within shipping boxes.
  • Shipping labels: Labels used to address and identify packages being sent.
  • Markers and pens: Writing instruments used for labeling or addressing packages.
  • Custom branded packaging: If you have custom packaging with your company's branding, the costs may be deductible.
  • Shipping software: The cost of shipping software that helps manage and streamline shipping processes can be deductible.
  • Postage stamps: The cost of postage stamps used for mailing documents or small parcels.
  • Label printers and supplies: If you use specialized label printers, the equipment and associated supplies may be deductible.
Let’s say you’re a social media influencer and created your own clothing brand. To send the clothing to your followers, you need to purchase packing tape, shipping labels, boxes and packing paper. Since these shipping costs are related to your business, you can write off the shipping costs. Or, you run a cupcake business out of your kitchen. You need to ship the cupcakes to your customer and ensure they arrive without getting smushed or stale. The special cupcake shipping boxes, overnight courier shipping costs, labels and tape are all deductible under the tax on shipping deduction. Regardless of how you ship your business items, it's important to keep detailed records of your shipping material expenses, including receipts and invoices, in case of an IRS audit.

When are business shipping expenses tax-deductible?

Anytime you need to send or ship something business-related, the costs are tax-deductible. If you sell physical products and need to ship them to customers, the cost of shipping these products is typically tax-deductible. For instance, if you run an online store and ship products to customers, the shipping fees can be deducted. Shipping costs associated with mailing business documents, contracts, or invoices can be deductible. For example, if you send out contracts to clients via mail or courier, the shipping expenses are part of your business expenses. Shipping expenses for acquiring office supplies, such as ordering paper, ink cartridges or other materials online and having them shipped to your business location, can often be deducted. If you send out product samples or marketing materials to potential clients or partners, the shipping costs for these items are generally tax-deductible. Or, if you need to return items for your business, the shipping fees for those returns can be considered a business expense and, thus, are deductible.
 Infographic entitled Types of Business Shipping Methods listing the different ways you can send business materials.
Remember, the key to deducting shipping expenses is to ensure they are directly related to your business activities.

Do you pay tax on shipping costs?

The answer to this question depends on where you live in the US. Some states say shipping costs are taxable, while others don’t. Some things to keep in mind are:
  • You need to be an eCommerce business without a physical store.
  • Your items are delivered to customers by a common courier service.
  • You don’t deliver the items yourself through a delivery service, including Doordash or Instacart.
  • You're shipping to customers who live in the same state you live in and are shipping from.
Infographic entitled Is Shipping Taxable listing the states that have shipping taxes and states without shipping taxes.
If you live in Charleston, South Carolina and are shipping chocolates and fudge from your online sweets business to a customer in Seabrook Island, you’ll need to pay the shipping taxes since in South Carolina shipping charges are taxable.

How do you report shipping costs?

First, you’ll need to gather all of your shipping receipts and invoices. If you’re using FlyFin, everything you need is right in the app. There’s no need to look for a single receipt! Any shipping costs get reported on Schedule C of Form 1040 if you’re a sole proprietor or freelancer. Other business entities may have different forms for reporting their business deductions. Enter the total shipping costs as a business expense on line 27a. This is usually done in the section where you report various business expenses. You'll need to provide details such as the total amount spent on shipping and the purpose of the shipping (shipping products to customers, sending business documents, etc.). Irrespective of whether you pass shipping charges to your customers or not, you need to subtract your shipping costs as part of your Cost of Goods Sold. You’ll then need to check if your state requires you to collect sales tax on shipping expenses. If you used your business account to ship personal items to family or friends, you cannot deduct these expenses.

What if I sell and ship items through Poshmark?

Poshmark is a popular site for selling new and gently used clothing, electronics and accessories. It’s like a virtual garage sale and online marketplace all in one where you can earn cash without leaving your couch. Once you’ve gathered all the items you want to sell, you’ll create a profile and then snap and upload photos to the site. Customers can purchase your items, and you have the liberty to charge shipping costs or include it in the price. You’ll need to ship the items to the seller. So, do you have to pay taxes on your Poshmark sales? That depends on whether you’re selling as a hobby or a business. This distinction makes a huge difference in the eyes of the IRS.
Infographic entitled Hobby vs. Business listing the differences between a business and a hobby for tax purposes.
If you’re cleaning out your closet and selling some old clothes that don’t fit anymore, you’re probably just a hobby seller. But maybe you’re an avid thrifter and have a regular customer following for your thrift finds. In this case, your Poshmark account is acting more like a business.

Poshmark and taxes

The good news is that Poshmark sellers don’t have to pay sales tax. The buyer pays sales tax unless they live in a state that doesn't charge sales tax, including:
  • Oregon
  • New Hampshire
  • Montana
  • Delaware
The sales tax feature is built right into the website, and Poshmark automatically collects the sales tax from the seller during checkout, so you don’t have to worry about a single thing! The not-so-good news is that if you make $400 or more in sales, you’re required to pay self-employment taxes. The self-employment tax rate is 15.3%, with 12.4% for Social Security and 2.9% for Medicare. Typically, your employer covers half of the costs, but when you’re self-employed, it’s up to you to pay the full amount. You’ll also need to pay your taxes quarterly instead of one lump sum once a year. A quarterly tax calculator is just the tool to help ensure you make accurate payments to avoid IRS penalties.

When does Poshmark send 1099 tax forms?

Your clients send you tax forms called 1099s when you work as a 1099 employee. Poshmark sends 1099s to anyone using that platform with $20,000 or more in sales and 200 or more transactions. The Poshmark 1099-K is typically sent in January at the beginning of the year. The Poshmark tax forms can be found in your online Poshmark profile. They will also send the Poshmark 1099-K via mail if you opt for the paper copy. Once you receive your Poshmark 1099-K, FlyFin can help you with everything tax-related. A.I. will find every possible deduction, helping you save the most possible. Then the CPA team will review and file your taxes and are available to answer any questions. They can also help you with your tax on shipping supplies or anything else relating to shipping for your business. With FlyFin, taxes are sure to be a breeze.

Office Supplies Tax Deduction

Office supplies are tax deductible for self-employed individuals and can be reported under the office expenses category on Schedule C.

Phone Tax Deduction

Cell phones can be a business tax deduction for self-employed individuals if it is an ordinary and necessary expense. A separate business cell phone can be fully written off.

Advertising Tax Deduction

Ordinary and necessary promotion expenses and marketing expenses are tax-deductible for self-employed individuals. They should be claimed on Schedule C when filing 1099 tax.

Business Insurance Tax Deduction

Self-employed individuals can deduct business insurance expenses from their 1099 taxes. Sole proprietors and single-member LLCs can claim it on Schedule C.

Meals Tax Deduction

The meals and entertainment deduction in 2023 allows 1099 workers to deduct 50% of business meal costs. Certain meal and entertainment expenses are still fully deductible.

Business Travel Tax Deduction

Expenses related to traveling are deductible for business purposes. A per diem rate is set for deductible travel expenses.

Charitable Contribution Tax Deduction

If you make a charitable donation to an organization, it might count as a tax deduction. Not all charitable donations count as a write-off.

Clothing And Accessories Tax Deduction

Self-employed individuals can take the clothing tax deduction if their clothes cannot be worn outside the work environment.

Commission And Fees Tax Deduction

Self-employed individuals can claim certain commissions and fees as tax deductions if they are related to their business and are ordinary and necessary.

Contract Labor Tax Deduction

If you do any contract labor, you will have to pay contract labor taxes, also known as SE tax. Estimated payments quarterly need to be made for tax liabilities over $1,000.

Internet and WiFi Tax Deduction

Self-employed individuals can deduct some of their internet bills if they work from home as part of the home office deduction. Internet costs can also be reported on Schedule C.

Medical and Dental Tax Deduction

Certain dental and medical costs can be claimed as a medical tax deduction if itemized when paying income taxes. Expenses have to be more than 7.5% of AGI.

Rent Tax Deduction

Rent is tax deductible for self-employed individuals who work from home or have a separate office space. Some states offer renters tax credits to lower state taxes.

Repair and Maintenance Tax Deduction

Capital improvements can be claimed as a tax deduction through depreciation. Repairs to rental properties can be claimed as a business expense.

Professional and Legal Services Tax Deduction

Legal fees are tax deductible from 1099 taxes under the legal and professional fees category on Schedule C. The category also includes consultant and tax prep fees.

Software Tax Deduction

Software depreciation can be claimed with the straight-line method, Section 179 or through amortization. Report software depreciation on Form 4562.

Student Loan Payment Tax Deduction

Student loan interest paid is tax-deductible, and every type of education loan qualifies for the deduction.

Taxes and Licenses Tax Deduction

Self-employed individuals can take the license fee tax deduction on taxes and licenses that are ordinary and necessary business expenses.

Training and Education Tax Deduction

The educator expenses tax deduction allows eligible educators to deduct $300 of unreimbursed expenses from their taxes. Use education tax credits to lower tax liability.

Utilities Tax Deduction

Utilities are tax deductible when they are an ordinary and necessary business expense. They can be claimed with the home office deduction or as a rental property deduction.

Vehicle Insurance Tax Deduction

Interest on a car loan is tax deductible if it is used for business. Choose between the standard and actual method when claiming the vehicle deduction.

Vehicle Purchase Tax Deduction

You can claim the vehicle tax write-off if you’re self-employed and use your vehicle for business. It can also be taken if you lease your vehicle.

Mortgage Interest Tax Deduction

The mortgage interest deduction can be claimed by homeowners who itemize their expenses. You could claim the mortgage interest tax credit if you’re in a lower tax bracket.

Office Supplies Tax Deduction

Office supplies are tax deductible for self-employed individuals and can be reported under the office expenses category on Schedule C.

Phone Tax Deduction

Cell phones can be a business tax deduction for self-employed individuals if it is an ordinary and necessary expense. A separate business cell phone can be fully written off.

Advertising Tax Deduction

Ordinary and necessary promotion expenses and marketing expenses are tax-deductible for self-employed individuals. They should be claimed on Schedule C when filing 1099 tax.

Business Insurance Tax Deduction

Self-employed individuals can deduct business insurance expenses from their 1099 taxes. Sole proprietors and single-member LLCs can claim it on Schedule C.

What’s FlyFin?

FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors. But anyone can file taxes through FlyFin! FlyFin tracks all your business expenses automatically using A.I. technology. Then, our CPA team files a guaranteed 100% accurate tax return for you – to save you a couple thousand dollars and a ton of time on your taxes. In addition, you can download the FlyFin app and have your taxes filed in less than fifteen minutes, saving time and money.
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