Tariffs are a common part of international trade, but for businesses selling taxable goods, they also introduce an important consideration: how tariffs affect the total amount subject to sales tax.

In this article, we’ll break down how tariffs affect sales tax, how they impact pricing, and what you should do to ensure proper sales tax compliance.

What Are Tariffs?

A tariff is a tax imposed by a country on imported goods. The importer is responsible for paying the tariff at the time of import, but the cost is often passed on to the end customer, either by increasing the product price or by listing the tariff as a separate line item on an invoice.

For example, if an importer brings in a pair of shoes with a 20% tariff, they must pay this amount when clearing customs. If the shoes originally cost $100, the new price might be $120 after accounting for the tariff.

This price increase can be handled in two ways:

1. The seller includes the tariff in the final product price ($120 per pair of shoes).
2. The seller lists the tariff separately as an additional charge on the invoice ($100 for the shoes + $20 tariff).

In both cases, the full amount, including the tariff, is generally taxable when sales tax is applied.

How TaxCloud Helps with Tariffs

If a business includes the tariff cost within the product price, sales tax calculations proceed as usual. However, for businesses that choose to list tariffs separately on invoices, TaxCloud provides a specific Taxability Information Code (TIC 10012) to ensure proper tax treatment. This TIC ensures that the tariff follows the taxability of the underlying item. If the item is taxable, the tariff will also be taxable. If the item is exempt, the tariff will be exempt as well.

Key takeaways for TaxCloud customers:

• If you include the tariff in your product price, no additional action is required—it will be taxed along with the item.
• If you list tariffs separately on invoices, you should use TIC 10012 to ensure accurate sales tax calculation.
• TaxCloud does not handle the payment of tariffs; importers must pay them directly when bringing goods into the country through customs.

Clarification from the Streamlined Sales Tax Governing Board

According to the Streamlined Sales Tax Taxability Matrix, most states include tariffs in the taxable sales price, whether they are separately stated or included in the price of the item sold. This is because tariffs fall under the category of taxes and any other expense imposed on the seller, making them subject to sales tax. This aligns with tax definitions that prohibit deductions for seller-incurred costs when calculating the taxable sales price.

No Tariffs Between U.S. States

While tariffs apply to international imports, there are no tariffs between U.S. states. The U.S. Constitution prohibits states from imposing additional taxes or fees on goods imported from other states. This means states must tax in-state and out-of-state goods at the same rate.

Why This Matters for eCommerce Businesses and Accountants

For eCommerce businesses, understanding tariffs is essential for pricing strategies, profitability, and compliance. Proper handling of tariffs ensures that businesses do not miscalculate taxable amounts, avoiding potential audits or penalties.

Accountants, who manage financial reporting and compliance, must also be aware of how tariffs affect taxable transactions.

As tax regulations evolve, TaxCloud remains committed to providing accurate and automated sales tax solutions for businesses selling across state and national borders.

The world of sales tax is always changing. And the discussion around international tariffs has created a lot of uncertainty for ecommerce businesses. TaxCloud’s commitment to you is that we will be here to help reduce complexity in your sales tax compliance processes and will continue to monitor the latest tariff news to ensure we are ready to support you however we can.

For assistance with setting up TIC 10012 or other tax-related questions, TaxCloud’s team is always available to help.