Shipping
What is it
The cost associated with transporting goods to the client. It often includes handling and packaging fees. It appears as a separate line item or a distinct field.
When is it required
When physical goods are delivered and the seller charges for transport. This depends on the Incoterms agreed upon (e.g., FOB vs. CIF).
Incoterms 2020
International Commercial Terms define who pays for shipping, insurance, and duties.
| Term | Full Name | Who Pays Shipping? |
|---|---|---|
| EXW | Ex Works | Buyer. Seller just makes goods available at their factory. |
| CIP | Carriage & Insurance Paid | Seller pays freight and insurance to destination. |
| DDP | Delivered Duty Paid | Seller pays everything (shipping + duties + tax) to buyer's door. |
Tax on shipping
In most jurisdictions (UK & EU), shipping is considered part of the service and attracts the same tax rate as the goods. If you sell standard-rated T-shirts, the shipping fee is also standard-rated.
Common pitfalls
- Forgetting to apply tax to shipping costs. Shipping is often taxable in many jurisdictions.
- Estimating costs that turn out to be lower. Clients dislike unexplained surcharges.
- Hiding shipping in the item price without agreement. This distorts unit pricing analytics.
Common mistakes when filling the field
- Listing shipping as a service date. This is a categorization error.
- Failing to provide a tracking number for reference. This frustrates the logistics team.
- Charging shipping on digital goods by accident. This looks unprofessional.
Why is it there
It recovers the cost of logistics. It prevents the seller from losing margin on delivery fees. It clarifies the handover point of responsibility.