Shipping and Handling Charges on Invoices
How to show shipping and handling charges on an invoice: separate lines, flat vs weight-based pricing, tax on delivery in the US, UK and India, with an example.
You can show shipping and handling charges on an invoice as one combined line or as two separate lines, but either way they should sit apart from the products, with a clear label and amount. That keeps the price of the goods transparent, lets the customer check delivery costs against what you quoted, and, most importantly, lets you apply the right tax treatment, which differs between the US, the UK, India and elsewhere.
This guide explains how to word and price shipping and handling lines, how they affect tax, and how to handle international orders, with a worked invoice example. It is general information; tax treatment of delivery varies, so check local guidance for your situation.
Shipping vs handling: what each covers
- Shipping (delivery, freight, postage): the cost of moving the goods to the customer, such as a courier, postal service, freight carrier or your own van.
- Handling: the cost of preparing the order: picking, packing, packaging materials, pallets, labels and sometimes insurance arrangements.
Many small sellers show a single "Shipping & handling" line. Larger or B2B sellers often separate them, especially when handling has a fixed per-order cost and shipping varies by weight. Whatever you do, describe it accurately: a charge labelled "postage" should be broadly the cost of postage.
How to show shipping on an invoice: worked example
A wholesaler ships 3 cartons of goods to a retailer. Shipping is taxable in this example, so it goes into the taxable amount before tax at 8%.
| Description | Qty | Unit | Unit price | Amount |
|---|---|---|---|---|
| Ceramic mugs, 350 ml, white, carton of 24 | 2 | carton | $96.00 | $192.00 |
| Glass tumblers, 300 ml, carton of 36 | 1 | carton | $118.80 | $118.80 |
| Shipping: ground freight, 3 cartons, 28 kg total | 1 | shipment | $42.50 | $42.50 |
| Handling: packing and fragile protection | 1 | order | $6.00 | $6.00 |
| Products subtotal | $310.80 |
| Shipping and handling | $48.50 |
| Taxable amount | $359.30 |
| Sales tax 8% | $28.74 |
| Total due | $388.04 |
The math: 192.00 + 118.80 = 310.80; 42.50 + 6.00 = 48.50; 310.80 + 48.50 = 359.30; 359.30 × 8% = 28.744, rounded to 28.74; 359.30 + 28.74 = 388.04. If shipping were not taxable here, tax would apply only to $310.80 (tax $24.86) and shipping would be added after tax. Our guide to calculating invoice totals shows where each step goes.
Ship-to details matter too. If the goods go somewhere other than the billing address, show both; our article on billing address vs shipping address explains why accounts teams and tax rules care about the difference.
Ways to price shipping and handling
| Method | How it works | Example | Best for |
|---|---|---|---|
| Actual cost (pass-through) | Charge exactly what the carrier charges you | Courier invoice $18.40 → invoice $18.40 | B2B, large or irregular shipments |
| Flat rate | One price per order or zone | $9.95 per order within the state | Retail and online stores |
| Weight or volume based | Rate per kg or per carton | $1.50 per kg, 28 kg = $42.00 | Wholesale and heavy goods |
| Percentage of order | A percentage of the product subtotal | 5% of $310.80 = $15.54 | Mixed baskets, simple setup |
| Free over a threshold | No charge above a minimum order | Free delivery on orders over $250 | Encouraging larger orders |
| Cost plus handling | Carrier cost plus a fixed handling fee | $42.50 + $6.00 handling | Fragile or bulky goods |
Whichever you choose, put it in your quotation and shipping policy so the invoice simply confirms it. Our shipping policy template covers the wording for online stores.
Tax on shipping and handling charges
United States
Sales tax on delivery charges is set state by state. Some states tax shipping charges, some exempt them when they are separately stated, and some treat a combined "shipping and handling" charge differently from shipping alone. Showing shipping as its own separately stated line is often what makes it exempt where an exemption exists. For a state-by-state overview, see is shipping taxable?
United Kingdom
HMRC's guidance on postage and delivery charges (VAT Notice 700/24) says that where your contract is to supply delivered goods, a delivery charge follows the VAT liability of the goods, whether or not it is shown separately. So delivery of zero-rated books is zero-rated, and delivery of standard-rated goods is standard-rated. Where delivery is an optional extra the customer chooses, it is generally standard-rated. Charging postage to a customer is not exempt just because the postal service's charge to you was.
India
Under GST, transport supplied by the seller along with goods is typically treated as part of a composite supply, so freight charged on the invoice is taxed at the GST rate of the main goods. Include it in the taxable value rather than adding it after tax.
Other countries
Most VAT and GST systems treat delivery charged by the seller as part of the price of the goods. If you are unsure, include it in the taxable amount and confirm with your tax adviser.
International shipments and Incoterms
On cross-border sales, who pays for freight, insurance and import duties is set by the Incoterm in the contract. Under EXW the buyer collects and pays for transport; under FOB or FCA the seller pays to hand the goods over at the named point; under DAP the seller pays delivery to the destination; under DDP the seller also pays import duties and taxes. State the Incoterm and named place on the invoice (for example "DAP Rotterdam, Incoterms 2020") so the shipping line matches the agreed terms. Our guide to Incoterms on invoices explains each term, and exporters will also need a commercial invoice with weights and HS codes. A worked layout for online sellers is in our shipping invoice template.
How to word shipping and handling lines
The description should let the customer check the charge without asking. Useful details are the service level, the number of parcels or cartons, the weight and, for freight, the route or carrier service. Examples:
- "Delivery: tracked courier, next working day, 2 parcels"
- "Freight: LTL, 2 pallets, 640 kg, Chicago to Denver"
- "Postage: standard letter post, 1 item" (only if the amount is the actual postage)
- "Handling: picking, packing and fragile protection, per order"
- "Delivery: free on orders over $250 (order value $310.80)" with an amount of $0.00
Showing free delivery as a $0.00 line is a small touch that reminds the customer of the value they received and confirms that delivery has not been forgotten.
Recording shipping in your books
Shipping you charge to customers is normally recorded as income (often in a separate "delivery income" account), and the carrier's bill to you as a cost of sales or delivery expense. Keeping the two in separate accounts shows whether your shipping charges actually cover what carriers charge you. If delivery income is $1,200 for the month and carrier costs are $1,550, you are subsidising $350 of shipping, which may be fine as a sales tactic but should be a deliberate choice.
Partial shipments, backorders and returns
If an order ships in two parts, decide in advance whether you charge delivery once or per shipment, and say so on the quote. Common approaches:
- Seller's split, seller pays: if you split the order because items were out of stock, charge delivery once and absorb the second shipment.
- Customer's request: if the customer asks for staggered deliveries, charge each delivery on the invoice for that shipment.
- Returns: state whether return shipping is refunded. If you refund the original delivery charge on a return, include it on the credit note so the tax on it is reversed too.
Supporting documents
For physical goods, the invoice is usually accompanied by a packing slip or delivery note. The packing slip lists contents without prices; the delivery receipt proves the customer received the goods. If a customer disputes a delivery charge or claims non-delivery, a signed delivery receipt is your best evidence.
Common mistakes with shipping on invoices
- Hiding shipping inside product prices on one invoice and charging separately on the next, which confuses customers and tax reporting.
- Adding shipping after tax when it should have been taxed (or the reverse).
- Calling a marked-up charge "postage at cost".
- No weight, carton count or service level in the description, so the customer cannot check the charge.
- Ignoring the Incoterm and charging freight the buyer already arranged.
- Forgetting to bill shipping at all on part-shipments and backorders.
You can add shipping and handling as separate lines in our free invoice generator, choose whether tax applies, and download the finished invoice as a PDF. No sign-up is needed.
Frequently asked questions
How do I add shipping charges to an invoice?
Add shipping as its own line below the products, with a clear description such as Delivery, standard courier, 2 parcels, and the amount. Place it before the tax calculation if shipping is taxable where you sell, or after the taxable subtotal if it is not. Showing shipping separately lets the customer see the product price and delivery cost clearly and lets you apply the correct tax rule.
What is the difference between shipping and handling?
Shipping is the cost of transporting goods to the customer, such as a courier or freight charge. Handling covers your own work and materials to prepare the order, such as picking, packing, boxes, pallets and labels. Some sellers combine them as shipping and handling; others list them separately. In some US states, combining them can change whether the charge is taxable.
Is shipping taxable on an invoice?
It depends on where you sell. In the UK, delivery that is part of the contract for goods generally follows the VAT treatment of the goods. In India, transport supplied with goods is usually part of a composite supply taxed at the rate of the goods. In the US, rules vary by state: some tax delivery charges, some do not, and some depend on how the charge is shown.
Can I charge more for shipping than it costs me?
Generally yes, as long as the charge is agreed or clearly disclosed before purchase and is not described misleadingly. If you label a charge as postage at cost but add a margin, that can be misleading. A clearer approach is to call it delivery or shipping and handling, show the amount up front in your quote or checkout, and keep your carrier invoices for your records.
Who pays shipping on international orders?
The agreed Incoterm decides who pays for transport, insurance and duties on international sales. Under EXW the buyer arranges and pays almost everything; under DAP the seller pays to deliver to the named place, and under DDP the seller also pays import duties. State the Incoterm and named place on the quotation and invoice so the shipping line matches what was agreed.
Invoice Creator Editorial Team
Guides on invoicing, cash flow and small-business finance from Invoice Creator, operated by Next Software Development Company. Content is reviewed for accuracy against the fields our own invoice generator produces.
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