LR 8244
Taxability of Food Delivery Facilitation Services
May 26, 2023
Dear Applicant:
This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated April 12, 2023.
The facts as presented in your letter ruling request, as well as communications with you, are summarized as follows:
Applicant operates an online platform that connects restaurants with potential Diners for a restaurant's sale of food and beverage. Before being listed on the platform, the Applicant and restaurants enter into an agreement whereby the Applicant agrees to provide marketing, order and delivery facilitation services to restaurants located in Missouri. Once listed on the platform, restaurants display their menus and attract additional Diners for their take-away and meal delivery services. In all instances, the restaurants listed on the Applicant's platform that are displayed for a Missouri-located Diner have brick-and-mortar business locations in the state.
Diners may browse local restaurants, review menus, read comments and ratings from other users and place orders with restaurants via the Applicant's platform. Once a Diner selects their food and beverage, the order is provided to the restaurant. The restaurant confirms the order and begins preparing the food. The Diner can choose to either pick up the order at the restaurant's business location, or have it delivered to a location of the Diner's choosing. When a Diner chooses the delivery option, an additional delivery fee is added to the customer's bill for the delivery service. If a Diner chooses to pick up the food from the local restaurant no delivery fee is charged.
In some instances, a restaurant employs its own delivery drivers or arranges for delivery itself through a third party other than the Applicant ("Restaurant Delivery"). For Restaurant Delivery orders, the restaurant will receive the delivery fee paid by the Diner. In others, the Applicant facilitates delivery via an independent third-party contractor driver ("Applicant-Facilitated Delivery"). On Applicant-Facilitated Delivery orders, the Applicant retains the delivery fee paid by the Diner.
Once a restaurant confirms an order, the customer's credit card or PayPal account is charged for the selected items, any delivery fee (if applicable) and all applicable taxes. Once collected, the order subtotal, the delivery fee (if the restaurant performed the delivery service), and all tax imposed thereon are remitted to the restaurant. The restaurant contractually agrees to remit the taxes collected to the state on its own behalf as the seller of the underlying food and beverage.
The Applicant does not maintain any property or have any employees in Missouri, and has no place of business in Missouri, and the Applicant is not a food preparation entity.
ISSUE 1:
Does the Applicant need to collect and remit sales taxes on sales to Missouri Diners, from in-state (Missouri) restaurants?
RESPONSE 1:
No. The Applicant is not required to collect and remit sales taxes on deliveries made to Missouri Diners from in-state restaurants. The Applicant may transfer sales taxes collected on behalf of Missouri restaurants to those restaurants, but those Missouri restaurants are the sellers with primary reporting and remittance obligations under Missouri sales tax law.
Section 144.020.1(1) RSMo, imposes a sales tax upon retail sales of tangible personal property.
Section 144.021. RSMo, imposes the primary sales tax burden upon the seller with respect to retail sales of tangible personal property.
In this instance, the position of the Applicant is similar to that of a financial institution or credit card company, in that the Applicant is receiving and processing funds (for food, drink, and properly assessed taxes) taken on behalf of a selling restaurant. In filling this role, the Applicant is not required to collect or remit taxes in much the same way that credit card companies are not required to collect or remit sales taxes on payments facilitated by those credit card companies. The Applicant's lack of a reporting or remittance obligation in no way limits the reporting or remittance requirements imposed upon Missouri restaurants, who must still charge, collect, and report sales taxes on transactions facilitated by the Applicant.
ISSUE 2:
Are delivery fees paid by Missouri Diners, and collected by the Applicant, subject to Missouri sales and use taxes?
RESPONSE 2:
No. Based upon the facts supplied by the Applicant, the delivery fees are not mandatory, and the delivery fees are not subject to Missouri sales and use taxes.
Section 144.010.1(4) RSMo, excludes delivery charges from sales taxes when those charges are usual and customary delivery charges stated separately from the sale price of any taxable goods. A delivery fee is an optional fee paid (and stated) separately from the price of the good being delivered.
The delivery charges are optional, and are not mandatory, based upon the facts provided by the Applicant. A Diner can avoid paying a delivery fee by picking up the food and drink themselves. As such, the separately stated delivery charges collected by the Applicant are not subject to sales tax.
This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.
Should additional information be needed, please contact Legal Counsel Nathan Jefferson, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.
Sincerely,
Wayne Wallingford