Is an online food-ordering platform a vendor or co-vendor of the restaurant meals, and are its fees to restaurants taxable?

Plain-English summary

The Petitioner runs a website through which about 5,000 restaurants offer meals for sale. Customers browse menus, order and pay (including sales tax) through the site; the Petitioner routes each order to the chosen restaurant and forwards the money to the restaurant, minus its fees. The restaurant sets prices, confirms the order, delivers the food, handles cancellations and problems, and is responsible for remitting the sales tax. The Petitioner charges restaurants an activation fee, a menu-update fee, and a fixed monthly marketing-partnership fee. It asked whether it is a vendor of the food and whether its fees are taxable.

The Office of Counsel concluded the Petitioner is not a vendor and not a co-vendor, and its fees are not taxable:

• The restaurant tax. Section 1105(d) taxes food and drink sold by restaurants or caterers. The Petitioner is not operating a restaurant and is not catering.
• Not a vendor. The Petitioner's activities are a combination of internet advertising services and fulfillment services to the restaurants (Tax Law 1101(b)(8)(v)(A), (18)). Providing those services does not make it the vendor of the restaurant sales (TSB-A-99(49)S).
• Not a co-vendor. Because it is providing fulfillment services, it cannot be treated as a co-vendor jointly responsible for collecting the tax (1101(b)(8)(ii)(A)).
• Its fees aren't taxable. The activation, menu-update, and marketing-partnership charges are for nontaxable services, so the Petitioner doesn't collect sales tax on them.
• One caveat. If the Petitioner collects sales tax on a restaurant's behalf and fails to remit it to the restaurant, the Commissioner can recover those funds from the Petitioner under the doctrine of money had and received.

What this means for you

Online ordering / delivery marketplaces

Merely listing restaurants, taking orders, and passing payment through -- while the restaurant sets prices, delivers, and owns the customer relationship -- makes you a provider of advertising and fulfillment services, not the seller of the meals. You are not the vendor and not a co-vendor, and your platform/marketing fees to restaurants are not taxable services.

The restaurant still owns the tax

The selling restaurant must collect and remit the sales tax on the meals. The platform's pass-through of the payment does not shift that duty.

Don't sit on tax you collect

If you collect the sales tax and route money to restaurants, remit the tax you collected. Holding back tax money you collected exposes you to a state claim for "money had and received," even though you aren't the vendor.

Common questions

Q: Our app takes restaurant orders and payments. Are we the vendor responsible for the meal tax?
A: No, on these facts. You're providing advertising and fulfillment services; the restaurant is the vendor that collects and remits the tax.

Q: Are our activation, menu, and marketing fees to restaurants taxable?
A: No. Those are nontaxable service charges.

Q: We collect the tax in the order total -- any risk to us?
A: Yes if you keep it. If you collect tax for a restaurant and don't remit it, the state can recover those funds from you.

Citations and references

• Tax Law section 1105(d) (sales tax on restaurant food and drink and catering)
• Tax Law section 1101(b)(8) (definition of vendor)
• Tax Law section 1101(b)(8)(v)(A) (advertising/marketing not enough to be a vendor)
• Tax Law section 1101(b)(18) (fulfillment services)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2014.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a14_27s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-14(27)S
Sales Tax
August 20, 2014

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S110331A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED.
Petitioner asks whether it is a vendor selling food products subject to sales tax under Tax Law
§1105(d) and whether its charges to its clients are subject to sales tax.
We conclude that Petitioner is not a vendor for purposes of Tax Law § 1101(b)(8) and cannot
be designated as a co-vendor on the restaurant sales. Petitioner’s service fees billed to its clients are not
subject to sales tax.
Facts
Petitioner operates a website through which approximately 5,000 restaurants in over 27 cities
and two countries offer meals for sale. The website provides restaurants with a way for customers to
order and pay for their meals. When a meal is ordered through the website, the payment submitted to
the Petitioner by the customer includes sales tax. Petitioner remits all funds collected from the
customer to the restaurant, less its marketing services fees. The selling restaurant is responsible for
remitting any sales tax collected to the appropriate taxing authority. The selling restaurant is also
responsible for delivery of the meals and maintains possession, control and care of all items being
offered for sale on the Petitioner’s web site.
Petitioner charges restaurants a one-time activation fee and a menu update fee. It also charges
restaurants a fixed monthly marketing partnership fee, in exchange for which Petitioner will use
commercially reasonable efforts to compile, write, and display general information about the
restaurant.
Petitioner’s web site allows searches to be made by restaurant name, food type or geographic
area. Petitioner’s website lists a menu for each restaurant with which Petitioner has a contractual
relationship. The prices listed on these menus are the same as charged on the restaurant’s own take out
menu. Each restaurant determines its own minimum delivery amount.
A customer places his or her order through Petitioner’s website. Petitioner instantaneously
routes the order electronically to the restaurant selected by the customer. The restaurant then sends the
customer an email that contains a confirmation number and includes contact information for the
restaurant. The confirming email will also list the details of the order, the total price and tax for the
meal order, and an estimated delivery time. Customer must send cancellation notices for orders
directly to the restaurant. Petitioner’s web site states that, if a customer has any problems with the
food or delivery, “the best thing to do is to contact the restaurant directly.” Customers pay Petitioner
for the restaurant meals by credit card.

-2-

TSB-A-14(27)S
Sales Tax
August 20, 2014

Analysis
Section 1105(d) of the Tax Law, in part, imposes sales tax on the following:
(i) The receipts from every sale . . . of food and drink of any nature or of food alone, when sold
in or by restaurants, taverns or other establishments in this state, or by caterers, including in the
amount of such receipts any cover, minimum, entertainment or other charge made to patrons or
customers (except those receipts taxed pursuant to subdivision [f] of this section):
(1) in all instances where the sale is for consumption on the premises where sold;
(2) in those instances where the vendor or any person whose services are arranged for by the
vendor, after the delivery of the food or drink by or on behalf of the vendor for consumption off
the premises of the vendor, serves or assists in serving, cooks, heats or provides other services
with respect to the food or drink ....
Petitioner is not operating a restaurant or similar establishment. Nor is it providing catering services for
purposes of Tax Law § 1105(d). Petitioner's activities constitute the combination of the provision of
Internet advertising services and fulfillment services to the restaurants. See Tax Law §§
1101(b)(8)(v)(A), (18). These activities do not make Petitioner the vendor of the restaurant sales for
purposes of New York sales tax. See TSB-A-99(49)S. Further, because the Petitioner is providing
fulfillment services, it cannot be treated as a co-vendor, jointly responsible with the restaurants for the
collection of sales tax. See Tax Law § 1101(b)(8)(ii)(A). However, if Petitioner fails to remit to a
restaurant the full New York sales tax that Petitioner collected on behalf of the restaurant, the
Commissioner reserves the right to collect those funds from Petitioner under the doctrine of money had
and received. See City of New York v. Advance Trading Corp., 202 Misc. 208 (1952); Matter of
Rywin, Tax Appeals Tribunal, April 24, 2008.
Petitioner’s charges to the restaurants are for services that are not subject to sales tax.
Therefore, Petitioner is not required to collect sales tax on these charges.

DATED: August 20, 2014

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts
set forth therein and is binding on the Department only with respect to the person or entity
to whom it is issued and only if the person or entity fully and accurately describes all
relevant facts. An Advisory Opinion is based on the law, regulations, and Department
policies in effect as of the date the Opinion is issued or for the specific time period at issue
in the Opinion. The information provided in this document does not cover every situation
and is not intended to replace the law or change its meaning.