In Connecticut, does a third-party food-delivery company have to charge sales tax on restaurant meals it resells, and is the delivery fee taxable?

Plain-English summary

A food-delivery business asked Connecticut how sales tax works when it buys meals from a restaurant chain at a discount and then resells and delivers those meals to customers. The customer orders through the delivery company, which passes the order to the chain, buys the meal at a wholesale/discounted price, and resells it to the customer at the chain's menu price plus a delivery fee.

The Department of Revenue Services ruled that there are two separate sales here, and the tax falls on the second one:

• The restaurant's sale to the delivery company is a sale for resale. The chain does not have to collect sales tax from the delivery company, provided the delivery company gives the chain a resale certificate. That is the normal rule for anyone buying goods to resell them.
• The delivery company's sale to the customer is the taxable retail sale. The delivery company is the retailer of the meal, so it must register with DRS, collect Connecticut sales tax on the full menu price, and remit it. Critically, it must also include the delivery fee in the taxable amount, because Connecticut's definition of "gross receipts" expressly includes any charge by the retailer for shipping or delivery.

In short: the meal is taxed once, at the point it reaches the customer, and the delivery charge rides along as part of the taxable price.

What this means for you

Third-party food-delivery and meal-reseller businesses

If your business actually buys the meals and resells them (as opposed to just charging the restaurant a marketing or courier commission), Connecticut treats you as the retailer. You must register for sales tax, collect tax on the resale price you charge customers, and — this is the part businesses most often miss — fold your delivery fee into the taxable price of the meal. You can buy the meals tax-free from the restaurant by issuing a resale certificate. Note that the tax result can turn on how your contracts are actually structured (buy-and-resell vs. agent/commission); this ruling addresses a genuine buy-and-resell model.

Restaurants and chains selling to delivery companies

When a delivery company that resells your food gives you a valid resale certificate, you should not charge it sales tax on that wholesale sale. Keep the certificate on file. The obligation to collect tax from the end customer shifts to the reseller. (This differs from arrangements where the platform is merely your agent and the restaurant remains the seller of record.)

Accountants and tax professionals

The ruling rests on treating the delivery company as a "retailer" reselling "meals" under Conn. Gen. Stat. § 12-407(a)(2)(E), and on the gross-receipts definition in § 12-407(a)(9)(A)(iii), which sweeps in the retailer's delivery charge. The resale relief for the chain depends entirely on a proper resale certificate. Watch the delivery-fee inclusion — separately stating it does not make it non-taxable when the retailer is selling taxable meals.

Common questions

Q: Is the delivery fee taxable in Connecticut?
A: When the retailer selling a taxable meal also charges the customer for delivery, yes — Connecticut's "gross receipts" definition expressly includes the retailer's shipping or delivery charge, so it is part of the taxable price even if listed separately.

Q: Does the restaurant charge the delivery company sales tax?
A: Not if the delivery company is buying the meals to resell them and provides a valid resale certificate. The sale to the reseller is then a tax-exempt sale for resale, and tax is collected later when the reseller sells to the customer.

Q: Who has to register and remit the tax?
A: In this ruling, the delivery company — because it is the retailer making the taxable sale to the end customer. It must register with DRS, collect the tax, and remit it.

Q: Does this apply to every food-delivery app?
A: Not automatically. A Connecticut Ruling is issued to a specific taxpayer on specific facts, and the analysis depends on whether the platform actually buys and resells the meals or merely acts as the restaurant's agent for a fee. Your arrangement may be taxed differently.

Citations and references

Statutes:

• Conn. Gen. Stat. § 12-407(a)(2) (sales tax on tangible personal property)
• Conn. Gen. Stat. § 12-407(a)(2)(E) (furnishing, preparing, or serving meals)
• Conn. Gen. Stat. § 12-407(a)(9)(A)(iii) (delivery charges included in gross receipts)
• Conn. Gen. Stat. § 12-410(1); § 12-411(9) (presumption that gross receipts are taxable)

Regulations:

• Conn. Agencies Regs. § 12-426-29(c) (taxation of meals; "eating establishment")

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 2018-1

Original ruling text

Ruling 2018-1, Sales and Use Taxes, Resale of Meals, Delivery Charges

FACTS:

A food delivery business (“Delivery Company”) purchases meals from a chain of restaurants (the “Chain”) and resells and delivers the meals to customers. A customer places a meal order directly with the Delivery Company, which transmits the order to the Chain. The Delivery Company purchases the meals from the Chain at a discounted price. The Delivery Company then resells the meals to customers at the price listed on the Chain’s menu, plus a delivery fee.

ISSUES:

Is the Chain required to collect sales tax on the sale of the meals to the Delivery Company?

Is the Delivery Company required to collect sales tax on the meals it sells to its customers?

RULINGS:

The Chain does not need to collect sales tax on the sale of the meals to the Delivery Company if the Delivery Company provides the Chain with a resale certificate.

The Delivery Company must collect sales tax on the meals that it sells to its customers and include the delivery fee in its gross receipts. The Delivery Company can provide a resale certificate to the Chain to purchase the meals without paying sales tax.

DISCUSSION:

Sales and use taxes are imposed on the sale of all tangible personal property, unless specifically exempt. Conn. Gen. Stat. § 12-407(a)(2). All gross receipts are presumed to be subject to sales and use taxes until the contrary is established. Conn. Gen. Stat. § 12-410(1); Conn. Gen. Stat. § 12-411(9).

Sales tax is specifically imposed on the furnishing, preparing, or serving for a consideration of food, meals or drinks. Conn. Gen. Stat. § 12-407(a)(2)(E). A regulation provides more details about the taxation of meals:

Meals sold by eating establishments or caterers are subject to sales tax. The measure of the tax is the gross receipts from the sale of meals.

(1)    Meals. For purposes of this regulation, “meals” mean food products for human consumption sold in such form and such portions that they are ready for immediate consumption and are of a type normally consumed on or near the location of the seller.

“Meals” include items described in the preceding sentence [that] are sold on a take-out basis.

(2)   Eating Establishment. For purposes of this regulation, “eating establishment” means a place where meals are sold and includes a cafeteria; catering hall; coffee and donut shop; fast food restaurant, including one selling items such as fish and chips, fried chicken pieces, hamburgers, etc.; ice cream shop; luncheonette; mobile food truck or cart, including one selling items such as coffee, ice cream, pastry, sandwiches, etc.; pizzeria; refreshment stand, including one located at a place such as an amusement park, bowling alley, stadium, theatre, etc.; restaurant; sandwich shop; snack bar; and a vending machine.

Conn. Agencies Regs. § 12-426-29(c).

The Delivery Company maintains the website presence where the meals are sold to its customers and is a retailer of the meals that it purchases from the Chain. The Delivery Company must register as a retailer and remit the tax it collects to the Department of Revenue Services on the meals it resells. The Delivery Company may provide a resale certificate to the Chain to purchase the meals without paying sales tax. For meals sold by the Delivery Company, the delivery charge must be included in the taxable gross receipts for the meals because the definition of “gross receipts” expressly includes any charges by the retailer to the purchaser for shipping or delivery. Conn. Gen. Stat. § 12-407(a)(9)(A)(iii).

LEGAL DIVISION May 15, 2018