Freight on out-of-state deliveries

Manufacturers may take a deduction from the manufacturing business and occupation (B&O) tax for the actual cost of delivering manufactured products to customers outside of Washington. The manufacturer is not required to invoice or bill the customer for delivery. However, any amounts invoiced or billed to the customer are part of gross income and must be reported. The manufacturer must be able to show that the amount deducted is the actual cost of delivering the products.

The manufacturer will:

• Report gross income (including delivery charges to the customer) under the Manufacturing B&O tax classification.
• Deduct the actual cost using the Freight on Out-of-State Deliveries classification.

Note: There is no freight deduction from the selling B&O tax (wholesaling or retailing) or the retail sales tax.