Freight in vs freight out: inbound and outbound freight in the books
Freight in vs freight out is an accounting distinction, not a trucking one, but it decides where a freight bill shows up in a business's books. Freight in is the cost of bringing goods into the business; freight out is the cost of sending them to customers. The first usually becomes part of the cost of the goods; the second is usually a cost of selling. This guide explains the difference, the IRS view, and the mistakes that blur it. It isn't accounting advice, and we dispatch carriers rather than ship freight; the distinction matters to shippers and to carriers who invoice them.
The two stacks below show an EXAMPLE small business's inbound and outbound freight for a month.
Total $2,800
Total $2,160
Freight in: part of what goods cost
Freight in, also called inbound freight or transportation-in, is the cost of getting raw materials, parts, supplies and merchandise to your business. The reasoning is simple: you can't use or sell the goods until they arrive, so the freight is part of what they cost you. For US tax purposes, the IRS says freight-in, express-in and cartage-in on raw materials, supplies used in production, and merchandise bought for sale are all part of cost of goods sold.
Source: IRS Publication 334 (2025), Tax Guide for Small Business, checked October 2026 Not accounting or tax advice.
In practice, that means inbound freight is usually added to the cost of inventory, and it reaches the income statement as part of cost of goods sold when the goods are sold.
Freight out: a cost of selling
Freight out, or outbound freight, is the cost of delivering goods to customers. It's usually treated as a selling or delivery expense, recorded when incurred, because the goods are already made and sold; shipping them is part of completing the sale. If you charge the customer for shipping, that charge is usually revenue, and the freight out is the matching expense.
Why the difference matters
Where freight lands changes your numbers. Freight in raises the cost of each unit and lowers gross margin. Freight out leaves gross margin alone and shows up in operating expenses. Two businesses with the same total freight can report different gross margins depending on how much of it is inbound. Pricing decisions depend on it too: if inbound freight is high, your true cost per unit is higher than the supplier's invoice says.
Carriers are on the other side of every freight-in and freight-out bill. Our dispatchers make sure every invoice goes out with clean paperwork, so your customers can book it right the first time.
Get loads with clean paperworkA worked example
One product, landed and deliveredExample
- SUPPLIER100 units at $40 each = $4,000 (EXAMPLE)
- FREIGHT IN$300 to bring them to your warehouse: $3 per unit
- UNIT COST$43 per unit goes into inventory, not $40
- SALEOne unit sold at $60; cost of goods sold $43, gross profit $17
- FREIGHT OUT$8 to ship it to the customer: a selling expense, below gross profit
These are EXAMPLE figures. Notice how freight in changes the unit cost and the gross profit, while freight out doesn't touch gross profit at all.
Landed cost
The total cost of getting a product to your door, purchase price plus freight in plus duties and other charges to bring it in, is often called landed cost. Businesses that price from the supplier's invoice alone underprice products with heavy or distant inbound freight. Tracking landed cost per product, even roughly, shows which items really earn their keep. It also shows when a closer supplier or a consolidated shipment would save more than a lower purchase price.
Who pays depends on the terms
Whether a freight cost is yours at all depends on the terms. The freight charge terms on the bill of lading say who the carrier bills: prepaid, collect or third party. The sale terms, such as FOB origin or destination, say who owns the goods in transit. Our guide to freight terms explains both.
Different kinds of freight charges
Freight bills come priced in different ways: a flat rate freight price for the load, a rate per mile, a rate per hundredweight, or a rate based on origin and destination freight zones. International shipments add charges such as terminal handling charges at ports. All of them are freight in or freight out depending on direction; the pricing method doesn't change the accounting.
Common mistakes
- Expensing inbound freight immediately instead of adding it to inventory cost.
- Mixing inbound and outbound freight in one expense account.
- Forgetting freight on returns, which belongs with the transaction it relates to.
- Leaving freight out of pricing: a product that looks profitable at the supplier's price may not be once inbound freight is added.
Your accountant decides the right treatment for your business and reporting rules.
Inbound freight management
Businesses with steady inbound freight often manage it actively: consolidating suppliers' shipments, choosing carriers for inbound lanes, and negotiating collect or third-party terms so they control the cost. That's called inbound freight management, and its goal is a lower and more predictable freight-in cost per unit.
For carriers
Carriers don't book freight in or freight out; they book revenue. But a carrier's own costs follow similar logic: some belong to each load, some to running the business. The load profitability calculator shows what one load really leaves after its own costs.
What to check and document
Owner-operators keep their own books too. Our owner-operator dispatch desk sends a weekly earnings report and keeps every load's paperwork together, and you approve every load. Send an application.