Does an online food-ordering and local-delivery platform have to collect Tennessee sales tax on orders from local restaurants and stores, or does it escape the marketplace-facilitator collection duty as a 'delivery network company'?

Plain-English summary

Effective October 1, 2020, Tennessee adopted a marketplace-facilitator sales-tax law. In general, a "marketplace facilitator" — a platform that, for a fee, facilitates other businesses' sales through its online or physical marketplace and collects the customer's payment — becomes responsible for collecting and remitting Tennessee sales and use tax on the sales it facilitates once it makes or facilitates more than $100,000 of sales to Tennessee customers in the prior twelve months. (The original 2020 law set a $500,000 threshold; the legislature lowered it to $100,000 before the law took effect.)

But the law carves out several exceptions to "marketplace facilitator," and one of them is a "delivery network company" — the kind of platform that runs a website or app to arrange local delivery of products from nearby merchants (think a local food-delivery app).

The taxpayer here operates an online forum (website and mobile app) that connects customers with Tennessee brick-and-mortar food and beverage sellers and arranges delivery, sometimes through its own independent-contractor drivers. The customer pays through the forum, picks delivery or in-store pickup, and the order is routed to the seller. All of the sellers are registered Tennessee dealers who contractually agree that they, not the platform, will remit the sales tax; the platform passes the tax it collected through to the seller (less its commission) along with a monthly statement reminding the seller to remit it.

The Department issued two rulings:

1. The platform is a "delivery network company," so it is not required to collect. Because the platform maintains a website and app that facilitate delivery services for the sale of local products, it qualifies as a delivery network company and is excluded from the definition of "marketplace facilitator." As a result, it is not required to collect and remit Tennessee sales and use tax on the sales made through its forum — so long as (a) it does not have common ownership or control with the sellers it contracts with, and (b) the deliveries it facilitates occur within fifty miles of the sellers. The Department noted that "facilitate" (undefined in the statute) means "to make easier" or "to help bring about," so the platform does not have to perform the delivery itself; offering customers a pickup option also doesn't change the result.

2. To skip collection as a marketplace facilitator (not a delivery network company), apply for a waiver. If a platform instead is a marketplace facilitator and is not a delivery network company (for example, because it shares common ownership with the sellers, or facilitates deliveries beyond fifty miles), it can still ask the Department to waive its collection duty — but only through the Request for Sales and Use Tax Collection Waiver Marketplace Facilitator or Marketplace Seller application, by demonstrating that substantially all of the marketplace sellers it facilitates for are registered Tennessee dealers. The form requires attaching a list of the sellers' names, addresses, and Tennessee sales-tax registration numbers (or an explanation for any missing registration number).

What this means for you

Local food, grocery, and goods delivery platforms

If you run a website or app that arranges local delivery of products from nearby merchants, you may be a delivery network company rather than a marketplace facilitator — meaning you are not on the hook to collect Tennessee sales and use tax on those orders. Two conditions are doing the work: you must not share common ownership or control with the merchants, and the deliveries you facilitate must stay within fifty miles of the merchant. Cross either line (an affiliated merchant, or a longer-haul delivery) and you can lose the exclusion and become a marketplace facilitator that must collect. Note you can also elect to be treated as a marketplace facilitator if you'd rather handle collection centrally.

Marketplace facilitators over the threshold

If you are a genuine marketplace facilitator (not a delivery network company) and you make or facilitate more than $100,000 of Tennessee sales in the prior twelve months, you must register, collect, and remit Tennessee sales and use tax on the sales you facilitate — and you're liable for that tax even if the underlying seller has its own registration or would have had to collect. You can shift the duty back to your sellers only by getting a Department waiver showing substantially all of them are registered Tennessee dealers.

Sellers (marketplace sellers) on these platforms

If you sell through a platform, find out who is collecting the tax. On a delivery-network-company platform like the one in this ruling, the seller remains responsible for collecting and remitting — so register, and don't assume the app is handling it. On a true marketplace-facilitator platform, the facilitator generally collects and remits for you, unless it has obtained a waiver.

Accountants and tax professionals

The classification turns on the statutory definitions: "marketplace facilitator" (§ 67-6-102(56)(A)) with its exclusions (§ 67-6-102(56)(B), including delivery network companies, which may elect in under (56)(B)(iv)); "delivery network company" (§ 67-6-102(26)); "delivery services," which exclude any delivery over fifty miles from the local merchant (§ 67-6-102(27)); and "local merchant," a business not under common ownership or control with the company (§ 67-6-102(53)). The facilitator's collection liability and the $100,000 threshold are in § 67-6-501(f) and (f)(1); the substantially-all-registered-sellers waiver is in § 67-6-501(f)(2). The thresholds come from 2020 Tenn. Pub. Acts ch. 646, § 8 ($500,000) as amended by ch. 759, § 7 ($100,000, effective Oct. 1, 2020).

Common questions

Q: Does my local food-delivery app have to collect Tennessee sales tax?
A: Not if it qualifies as a "delivery network company." A platform that runs a website or app to arrange local delivery of products from nearby merchants is excluded from the marketplace-facilitator collection duty, as long as it shares no common ownership or control with the merchants and its deliveries stay within fifty miles. The local sellers collect and remit the tax instead.

Q: What makes a platform a "delivery network company" rather than a marketplace facilitator?
A: It must maintain a website or app that facilitates delivery services for the sale of local products, with no common ownership or control over the merchants, and the deliveries it facilitates must stay within fifty miles of the merchant. It does not have to perform the deliveries itself — "facilitate" just means to make delivery easier.

Q: We're a true marketplace facilitator over the threshold. Can we make our sellers collect instead?
A: Only by obtaining a Department waiver. You must apply using the Request for Sales and Use Tax Collection Waiver application and show that substantially all of your marketplace sellers are registered Tennessee dealers, attaching their names, addresses, and Tennessee sales-tax registration numbers.

Q: What's the dollar threshold?
A: Effective October 1, 2020, a marketplace facilitator must register, collect, and remit if it made or facilitated more than $100,000 of sales to Tennessee consumers in the previous twelve months. (The law originally said $500,000 but was lowered to $100,000 before it took effect.)

Q: Can I rely on this ruling?
A: Not directly. A Tennessee revenue ruling is advisory and is not binding on the Department, and it reflects the law at one point in time. It shows how the Department reasons, but confirm your own facts and current law with a tax professional.

Citations and references

Tennessee statutes (Tenn. Code Ann.):
- § 67-6-102(56)(A) ("marketplace facilitator"); § 67-6-102(56)(B) (exclusions, including delivery network companies); § 67-6-102(56)(B)(iv) (a delivery network company may elect to be deemed a marketplace facilitator)
- § 67-6-102(26) ("delivery network company"); § 67-6-102(27) ("delivery services"; excludes deliveries over fifty miles from the local merchant); § 67-6-102(53) ("local merchant"; not under common ownership or control with the delivery network company)
- § 67-6-501(f) (marketplace facilitator liable to collect and remit on facilitated sales); § 67-6-501(f)(1) (more-than-$100,000 / prior-12-month threshold); § 67-6-501(f)(2) (waiver where substantially all marketplace sellers are registered Tennessee dealers)
- § 67-6-102(23)(C) ("dealer"); § 67-6-102(23)(N) (dealer includes a person that acts as a marketplace facilitator); § 67-6-102(84)(A), (C), (L) ("sale"; includes a sale made or facilitated by a marketplace facilitator); § 67-6-102(82) ("retail sale"); § 67-6-501(a) (collection and remittance liability)

Tennessee public acts:
- 2020 Tenn. Pub. Acts ch. 646, § 8 (original $500,000 marketplace-facilitator threshold); 2020 Tenn. Pub. Acts ch. 759, § 7 (lowered to $100,000, effective Oct. 1, 2020)

Cases (statutory construction of "facilitate"):
- Tennessee Farmers Assurance Co. v. Chumley, 197 S.W.3d 767 (Tenn. Ct. App. 2006); Beare v. Tennessee Department of Revenue, 585 S.W.2d 906, 908 (Tenn. 1993)

Source

• Landing page: https://www.tn.gov/revenue/tax-resources/legal-resources/tax-rulings.html
• Original PDF: https://www.tn.gov/content/dam/tn/revenue/documents/rulings/sales/20-13.pdf

Original ruling text

TENNESSEE DEPARTMENT OF REVENUE
REVENUE RULING # 20-13
Revenue rulings are not binding on the Department. This ruling is based on the particular facts
and circumstances presented and is an interpretation of the law at a specific point in time. The
law may have changed since this ruling was issued, possibly rendering it obsolete. The
presentation of this ruling in a redacted form is provided solely for informational purposes and
is not intended as a statement of Departmental policy. Taxpayers should consult with a tax
professional before relying on any aspect of this ruling.
SUBJECT
The application of Tennessee sales and use tax to a marketplace facilitator.
SCOPE
Revenue Rulings are statements regarding the substantive application of law and statements of
procedure that affect the rights and duties of taxpayers and other members of the public. Revenue
Rulings are advisory in nature and are not binding on the Department.
FACTS
The Taxpayer operates an online forum that connects retailers (the “Sellers”) of certain foods and
beverages subject to the Tennessee sales and use tax (the “Products”) with potential customers. The
Taxpayer conducts business through the use of independent contractor delivery persons for certain
orders in several states, including Tennessee. Sellers contract with the Taxpayer to be included and
participate in the Taxpayer’s online forum, which provides Sellers access to the consumers who use
the online forum. All Sellers utilizing the Taxpayer’s forum maintain brick-and-mortar retail locations
within Tennessee. Sellers with a physical presence in Tennessee register with the Department to
collect and remit Tennessee sales and use tax and, by accepting the funds from the Taxpayer,
acknowledge that they collected and remitted the same on all taxable Tennessee sales, including
those made through the Taxpayer’s online forum.
In a typical transaction, a customer will access the Taxpayer’s online forum via their personal
computer or the Taxpayer’s mobile application. From there, the customer may browse the various
Product offerings of the Tennessee Sellers. When a customer wishes to purchase a particular Product
or Products, payment is made through the Taxpayer’s online forum. The Taxpayer collects the
customer’s payment, which includes any applicable taxes on the full amount paid by the customer for
the purchased Products. At the time of payment, the customer may elect either to pick up the Products
from the Tennessee Seller’s business location, or to have the Products delivered to them. The online
forum then transmits the customer’s order to the relevant Tennessee Seller for fulfillment. When a
customer chooses to have his/her Product delivered, either an employee of the Tennessee Seller
performs delivery, or the Taxpayer effects delivery from the Tennessee Seller’s business location
through a third-party independent contractor. The Taxpayer charges the Tennessee Seller a
commission on each order facilitated on its online forum.
As part of its services, the Taxpayer processes payment and transmits the funds and any sales tax
paid by the customer to the Tennessee Seller, less the Taxpayer’s commission. If the Tennessee Seller’s

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employee performed delivery, the Taxpayer also transmits a delivery charge to the Tennessee Seller.
The Tennessee Sellers contractually agree with the Taxpayer that they— not the Taxpayer—will remit
the requisite Tennessee sales tax imposed on the full price of the Tennessee sales to the Tennessee
Department of Revenue. The Taxpayer provides Tennessee Sellers with a monthly statement
indicating the amount of tax passed to them by the Taxpayer and required to be remitted to the state.
Specifically, that statement provides:
[The “Taxpayer”] collected $X.XX in taxes for the orders outlined above and sent it
directly to you. As part of your normal periodic tax return filing, it is your responsibility
to pay $X.XX to the proper taxing authority for such orders. Upon receipt of the $X.XX
in taxes shown in this statement, you hereby attest and confirm that you are properly
registered with and will report and remit such amounts to the proper taxing authority
on the appropriate periodic tax return. If these amounts are not reported and
remitted by you for any reason, you will notify [the Taxpayer] thereof.
RULINGS
1.

Is the Taxpayer a “delivery network company” as defined in TENN. CODE ANN. § 67-6-102(26)
(Supp. 2020) such that it is not required to collect and remit Tennessee sales and use tax on
sales made on its online forum to Tennessee consumers?
Ruling: The Taxpayer would be considered a “delivery network company,” as defined in TENN.
CODE ANN. § 67-6-102(26) (Supp. 2020), not required to collect and remit Tennessee sales and
use tax for sales of taxable Products made on its online forum if it does not have common
ownership or control of the Sellers with whom it contracts, and the deliveries it facilitates occur
within fifty miles of the Sellers.

2.

If the Taxpayer supplies to the Commissioner of the Tennessee Department of Revenue (the
“Department”) the entity/business name, physical address, and FEIN of all the Sellers on its
online forum, is that information sufficient to demonstrate substantially all of the Tennessee
sellers are registered and collecting and remitting Tennessee sales and use tax such that the
Taxpayer is not required to collect and remit sales and use tax for sales on its forum?
Ruling: If the Taxpayer is a marketplace facilitator but is not considered a delivery network
company and desires a waiver from the requirement that a marketplace facilitator collect or
remit sales and use tax for sales made through its online forum, it must request from the
Department and submit an application for Request for Sales and Use Tax Collection Waiver
Marketplace Facilitator or Marketplace Seller. The form asks that a marketplace facilitator
stating that substantially all of the marketplace sellers on its marketplace are registered in
Tennessee for sales and use tax purposes attach a list of the marketplace sellers’ names,
addresses, and Tennessee sales tax registration numbers or provide an explanation for any
marketplace seller’s Tennessee sales tax registration number not included on the list.

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ANALYSIS
Under the Retailer’s Sales Tax Act, 1 retail sales in Tennessee of tangible personal property and
specifically enumerated services are subject to the sales tax, unless an exemption applies. “Retail sale”
is defined as “any sale, lease, or rental for any purpose other than for resale, sublease, or subrent.” 2
TENN. CODE ANN. § 67-6-102(84)(A) (Supp. 2020) defines “sale” in pertinent part to mean “any transfer
of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any
manner or by any means whatsoever of tangible personal property for a consideration.” In addition
to the transfer of tangible personal property, the term “sale” also includes the “furnishing of any of
the things or services” taxable under the Retailers’ Sales Tax Act. 3
Tennessee’s sales tax liability is imposed on the dealer. “Dealer” is defined under TENN. CODE ANN. § 676-102(23)(C) to include any person who offers for sale at retail, or who has in such person’s possession
for sale at retail,” tangible personal property in this state. TENN. CODE ANN. § 67-6-501(a) (Supp. 2020)
adds that every such person “making sales, whether within or outside the state, of tangible personal
property, for distribution, storage, use, or other consumption in this state, or furnishing any of the
things or services taxable under this chapter” is liable for the collection and remittance of sales and
use tax.” 4
The Tennessee General Assembly enacted into law effective October 1, 2020, a sales tax provision
requiring a marketplace facilitator to collect and remit sales and use tax on sales made through its
marketplace if it made or facilitated total sales to consumers in this state of more than $100,000
during the previous twelve month period. 5 Effective October 1, 2020, the definition of sale includes,
any sale “made or facilitated by a marketplace facilitator,” 6 and the definition of dealer includes a
person that “acts as a marketplace facilitator.” 7 Moreover TENN. CODE ANN. § 67-6-501(f) specifically
states that a marketplace facilitator is responsible for collecting and remitting sales and use tax:
When a marketplace seller uses a marketplace facilitator to facilitate sales of tangible
personal property or any of the things or services taxable under this chapter, the
marketplace facilitator is liable for the taxes imposed by this chapter on the sales price
of the tangible personal property or the things or services taxable under this chapter
regardless of whether the marketplace seller has a sales tax certificate of registration

1

Tennessee Retailers’ Sales Tax Act (codified at TENN. CODE ANN. §§ 67-6-101 to -907 (2018 & Supp. 2020)).

2

TENN. CODE ANN. § 67-6-102(82) (Supp. 2020).

3

TENN. CODE ANN. § 67-6-102(84)(C).

4

TENN. CODE ANN. § 67-6-501(a) (Supp. 2020).

5

2020 Tenn. Public Acts Ch. 646; 2020 Tenn. Public Acts Ch. 759, § 7.

6

TENN. CODE ANN. § 67-6-102(84)(L).

7

TENN. CODE ANN. § 67-6-102(23)(N).

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or would have been required to collect sales or use taxes had the sale not been
facilitated by the marketplace facilitator. 8
2020 Tenn. Public Acts Ch. 646, § 8 added a threshold to TENN. CODE ANN. § 67-6-501(f) requiring
marketplace facilitators to collect and remit sales and use tax if they have more than $500,000 in total
sales into Tennessee in the previous twelve-month period. However, before the law became effective,
through 2020 Tenn. Public Acts Ch. 759, § 7 (2020), the Tennessee legislature lowered the $500,000
threshold to $100,000 such that effective October 1, 2020, a marketplace facilitator must register in
Tennessee to collect and remit sales tax if it made or facilitated total sales to consumers in this state
of more than $100,000 during the previous twelve-month period. 9
1. DELIVERY NETWORK COMPANY
A marketplace facilitator is defined as a person who for consideration facilitates sales subject to sales
and use tax through a physical or electronic marketplace that collects payment from the purchaser
and transmits payment to the seller. 10 The definition of marketplace facilitator, however, contains
several exclusions. 11 One such exclusion is for delivery network companies; however, a delivery
network company may elect to be deemed a marketplace facilitator such that it would be required to
collect and remit sales and use tax. 12
Effective October 1, 2020, TENN. CODE ANN. § 67-6-102(26) defines delivery network company as a
“business entity that maintains an internet website or mobile application used to facilitate delivery
services for the sale of local products.” For this purpose, delivery services include the pickup of local
products from a local merchant and delivery to a customer but do not include “any delivery requiring
over fifty (50) miles of travel from the local merchant to the customer.” 13 A local merchant includes a
business such as a restaurant, kitchen, or grocery store “that is not under common ownership or
control with the delivery network company.” 14
The Taxpayer, here, would be excluded from the definition of marketplace facilitator and considered
a delivery network company because it maintains an internet website and mobile application that
facilitates delivery services of a local products so long as the deliveries that it facilitates are within fifty
miles of the Sellers and the Sellers are not under common ownership or control with the Taxpayer. 15

8

TENN. CODE ANN. § 67-6-501(f) (Supp. 2020).

9

TENN. CODE ANN. § 67-6-501(f)(1).

10

TENN. CODE ANN. § 67-6-102(56)(A).

11

TENN. CODE ANN. § 67-6-102(56)(B).

12

TENN. CODE ANN. § 67-6-102(56)(B)(iv).

13

TENN. CODE ANN. § 67-6-102(27).

14

TENN. CODE ANN. § 67-6-102(53).

15

See TENN. CODE ANN. § 67-6-1-102(27) and (53).

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A delivery network company “facilitate[s] delivery services;” however, the definition of delivery
network company does not define the term “facilitate,” nor is there a definition for the term elsewhere
in the Tennessee sales and use tax statutes. 16 The Tennessee Supreme Court has stated that when a
statute does not define a term, it is proper to look to common usage to determine the term’s
meaning. 17 In common usage, the term “facilitate” means “to make easier” or “to help bring about.” 18
This definition does not require that the business actually perform the delivery services; the only
requirement is that the network delivery company makes delivery services easier.
The Taxpayer here makes delivery services easier by allowing customers to access its online forum
regardless of whether the Taxpayer’s independent contractor or the Seller actually delivers the
Products. The fact that customers here have the option to pick up at the Seller’s location does not
change this determination. Accordingly, effective October 1, 2020, if the Taxpayer would otherwise be
considered a marketplace facilitator, it would be a delivery network company not required to collect
and remit Tennessee sales and use tax for sales of taxable Products made on its forum if it does not
have common ownership or control of the Sellers with whom it contracts, and the deliveries it
facilitates occur within fifty miles of the Sellers.
2.

WAIVER

The marketplace facilitator law effective October 1, 2020, contains certain provisions that allow
shifting of the burden for collecting and remitting sales and use tax on sales made through a
marketplace facilitator’s online forum from the marketplace facilitator to a marketplace seller. 19 Under
one such waiver provision, the law authorizes the Department to waive the requirement that a
marketplace facilitator that facilitates the requisite sales into Tennessee collect and remit sales and
use tax if a marketplace facilitator requests a waiver and demonstrates to the satisfaction of the
Commissioner, that substantially all of the marketplace sellers for whom it facilitates sales are
registered Tennessee dealers. 20
If the Taxpayer, here, is a marketplace facilitator but is not a delivery network company because it has
common ownership or control with the Sellers or facilitates deliveries to customers more than fifty
miles away from the Sellers, and it desires to seek a waiver from Commissioner, it may request a
waiver from the requirement that it collect and remit sales and use tax on the sales made through its
online forum by demonstrating that substantially all of the marketplace sellers for whom it facilitates
sales are registered dealers. 21 To do this the Taxpayer should contact the Department and request an
application for Request for Sales and Use Tax Collection Waiver Marketplace Facilitator or Marketplace
Seller. If the Taxpayer completes the application because substantially all of the Sellers on its
marketplace are registered in Tennessee for sales and use tax purposes, it must attach to the
16

TENN. CODE ANN. § 67-6-102(26).

17
See e.g. Tennessee Farmers Assur. Co. v. Chumley, 197 S.W.3d 767, 782-83 (Tenn. Ct. App. 2006); Beare v. Tenn. Dep’t of Revenue,
585 S.W.2d 906, 908 (Tenn. 1993).
18

MIRRIAM-WEBSTER’S COLLEGIATE DICTIONARY 447 (11TH ed. 2007).

19

TENN. CODE ANN. § 67-6-501(f).

20

TENN. CODE ANN. § 67-6-501(f)(2).

21

See TENN. CODE ANN. §§ 67-6-102(27), -501(f)(2).

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application a list of marketplace sellers’ names, addresses, and Tennessee sales tax registration
numbers or provide an explanation for any marketplace seller’s Tennessee sales tax registration
number not included on the list.

APPROVED:

David Gerregano
Commissioner of Revenue

DATE:

12/7/2020

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