Sales Tax Treatment of Third-Party Restaurant Delivery Services

The use of third-party delivery services such as Waitr, UberEats and Grubhub is becoming prevalent in the restaurant industry. A question facing several restaurant owners is what the tax implications for utilizing such a service are? As a result, I have submitted inquiries to several states to see what the correct sales tax treatment is for these types of transactions.

The initial question asked of each state was, "Would the transfer of a meal from a restaurant to a third party delivery service be considered a sale for resale and taxable to the delivery service? Or would this simply be seen as a service separate from the sale of any goods, and taxable to the restaurant?"

The following list provides the sales tax treatment for each state based on their responses:

Alabama-2Alabama

The delivery service is considered a separate service and the restaurant is ultimately responsible for the sales tax. 

Connecticut-1Connecticut 

Issued ruling no. 2018-1 on the matter, stating that the sales were sales for resale and the delivery company was liable for the tax.

FloridaFlorida

The delivery service is ultimately responsible for any sales tax on food delivered to a customer. The restaurant should be provided an exemption certificate stating that the sale is a sale for resale.

KentuckyKentucky 

The delivery service is ultimately responsible for any sales tax on food delivered to a customer. The restaurant should be provided an exemption certificate stating that the sale is a sale for resale.

MississippiMississippi

The delivery service is ultimately responsible for any sales tax on food delivered to a customer. The restaurant should be provided an exemption certificate stating that the sale is a sale for resale.

tENNESEETennessee

The delivery service is considered a separate service and the restaurant is ultimately responsible for the sales tax.

tEXASTexas

Texas was contacted but has yet to respond.

The states that were surveyed on the issue appear to be split on how these transactions should be treated. In addition, the delivery service may not be willing to provide a resale certificate to the restaurant, even if the state has taken the position that it is a sale for resale. Several of the contracts that were reviewed contained clauses that state that the restaurant is liable for all taxes, aside from income taxes, in conjunction with the sale of goods. The lack of conformity between the states, as well as uncertainty regarding how cooperative the delivery services will be, can create a lot of confusion for restaurant owners.

To minimize this uncertainty, restaurants should continue to collect tax unless the delivery service provider provides a resale certificate, regardless of which state the transaction occurs in. Most states require that a seller obtain an exemption certificate (resale certificate) from the reseller for instances where a product is being sold for resale. The exemption certificate will typically shift the liability of the tax to the buyer or the third-party delivery service in this case.

Even if a state considers the transaction to be a sale for resale, the restaurant will still need to obtain the exemption certificate or it could be liable for the tax as well. Companies like these third-party delivery services are changing the way that restaurants do business, but HORNE is here to provide the guidance that is necessary to ensure that your company stays ahead of these changes.