Is a company that runs a POS platform and mobile app connecting restaurants to workplace food events (popup counters, delivery, catering) a marketplace provider, and are the fees it charges restaurants taxable data processing services?

Plain-English summary

A company connects restaurants with office workers who want lunch, through three service lines: Popup (a restaurant sets up a counter at a client's workplace), Delivery (a mobile app for ordering delivery to a workplace), and Catering (managed catering orders for events). All three run on the company's own point-of-sale (POS) software or mobile app. The Comptroller ruled on two separate questions.

First, is the company a "marketplace provider"? Yes, for all three service lines. A marketplace is any physical or electronic medium through which someone other than its owner sells taxable goods, and a marketplace provider is whoever runs that medium and processes payments for the sellers. The Popup counter, the delivery app, and the catering platform are all mediums through which restaurants sell food, and the company's POS/app processes every payment. That makes the company responsible for collecting and remitting Texas sales tax on the restaurants' food sales — not just on its own fees.

Second, are the company's various fees to restaurants themselves taxable? Also yes — as data processing services, a taxable category that covers computerized storage, retrieval, and manipulation of data (things like scheduling, reporting, menu management, and order tracking). Because the POS platform and app do all of that — preloaded menus, event scheduling, time/temperature logs, sales analytics, order tracking — the core fees tied to using them (the Popup Fee, the Order Total Fee for Catering, and the Delivery Fee) are taxable data processing charges. The smaller fees that ride along with them (Scheduling Fee, Payment Processing Fee, Catering Fee) are also taxable, not because they're data processing on their own, but because Texas counts a seller's own costs of doing business as part of the taxable "sales price" of the main service. Since data processing services get a standard 20% exemption, only 80% of each fee is actually subject to tax. The separate Site Management Fee — charged when a restaurant doesn't supply its own plates, napkins, and utensils — is taxable as a straightforward sale of tangible personal property, not data processing.

What this means for you

Platform operators connecting sellers with buyers

If your platform processes payments for other businesses selling goods through it — whether that's a physical pop-up counter, a delivery app, or an online storefront — you likely qualify as a "marketplace provider" under Texas law and are on the hook for collecting and remitting sales tax on those sales, on top of whatever tax applies to your own service fees.

SaaS/software fee structures for restaurants and other sellers

Fees for using a platform's scheduling, reporting, or order-management features are treated as taxable data processing services if the platform's real function is storing and manipulating data on the seller's behalf — even if it's marketed as software access or a service fee rather than "data processing." Ancillary charges (payment processing pass-throughs, scheduling add-ons) tend to get pulled into the same taxable bucket as the main fee, as part of its "sales price."

Accountants and tax professionals

Note the layered analysis: marketplace-provider status (§ 151.0242) is analyzed completely separately from the data-processing-service taxability of the platform's own fees (§ 151.0035), and a company can be liable on both fronts simultaneously. Also note the credit-card-processing carve-out in § 151.0035(b)(3) does NOT apply here, because that exclusion itself has a carve-back for marketplace providers — so a Payment Processing Fee that might otherwise dodge tax as pure card processing gets pulled back into the taxable data-processing bucket once the charging party is a marketplace provider.

Common questions

Q: Does being a "marketplace provider" change who owes tax on the underlying food sales?
A: Yes. As marketplace provider, the company (not each individual restaurant) must certify that it's taking on the seller's sales-tax duties and must collect and remit tax on the restaurants' food sales made through its platform.

Q: Is data-processing tax the same as sales tax on the food itself?
A: No — they're separate taxable events. The food sales tax is collected on what customers pay for food; the data-processing tax applies separately to what the company charges restaurants to use its platform.

Q: Why is the Site Management Fee treated differently?
A: Because it's a charge for physical supplies (plates, napkins, utensils) rather than software/data functionality — so it's taxed as a straight sale of tangible personal property, with a resale-certificate option available to the restaurant for qualifying disposable items.

Q: Does this ruling apply to my delivery, marketplace, or SaaS platform?
A: Not automatically. This is a private letter ruling binding only on the Comptroller as to this taxpayer's specific facts. A platform with different features (or that doesn't process payments) could come out differently, so get your own ruling if this matters to your business.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.051, § 151.010, § 151.009 (sales tax imposition; taxable item; tangible personal property)
• Tex. Tax Code § 151.0242 (Marketplace Providers and Marketplace Sellers)
• Tex. Tax Code § 151.0035 (Data Processing Service), incl. (b)(3)/(c)(3) credit-card processing exclusion
• Tex. Tax Code § 151.007(a)(2) (Sales Price or Receipts)
• Tex. Tax Code § 151.351 (20% data-processing exemption)
• 34 Tex. Admin. Code § 3.330 (Data Processing Services); § 3.293(h)(5), (k)(2) (Food; Food Products; Meals; Food Service)
• STAR Accession No. 202109055L (Sept. 17, 2021); No. 202406004M (June 27, 2024)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/202410007L

Original ruling text

October 10, 2024

RE: Private Letter Ruling No. PLR20240306085105

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters.1 We are responding to your request dated Feb. 29, 2024. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance on whether ** (Taxpayer) meets the definition of a marketplace provider, and whether Taxpayer is providing taxable data processing services.

Facts Presented

The facts are based on information from Taxpayer’s original request, additional documentation provided by Taxpayer, and Taxpayer’s website. Taxpayer is a software, marketing, and event planning company that works with restaurants to offer food at client locations. Taxpayer provides its services through three main offerings: Popup, Delivery, and Catering. All services are powered by its in-house developed Point-of-Sale (POS) platform or mobile application.

Popup

In a Popup event, Taxpayer arranges for a restaurant to set up a food counter at a client workplace to sell food to client employees. At Popup events, restaurants set up a counter, take customer orders, prepare and serve the food, and clean the area afterwards. Taxpayer can also arrange to have multiple restaurants operate on the same day for larger clients with on-site cafeterias.

Taxpayer charges restaurants a flat scheduling fee (Scheduling Fee) and a percentage fee (20%-25%) based on total food sales (Popup Fee). The Scheduling Fee is a small administrative fee per event to provide the POS platform. The Popup Fee is for the use of the POS platform.

Taxpayer requires the restaurant to use the POS platform for every transaction. The restaurant downloads the POS platform onto its own hardware. The POS platform provides restaurants various functionality including intelligent scheduling and meal prep data based on event location, sales history, and weather.

The POS platform also provides restaurants’ preloaded menus, views of upcoming events, time and temperature logs, QR codes, site directions, offline and emergency modes, and monthly reporting of restaurant performance indicators such as sales and customer satisfaction. The POS platform processes payments, calculates sales tax, and retains Taxpayer’s fees for each transaction. Taxpayer then sends the remaining money, including the sales tax collected to the restaurant.

Delivery

In select cities, Taxpayer offers a delivery service through its mobile application. Client employees can use the application to order food from restaurants that have agreed to deliver to the client’s location. The restaurant accepts orders via Taxpayer's mobile application or webpage and prepares the food. Taxpayer coordinates with a driver to pick up and deliver the food to Client’s employees. Taxpayer solely charges restaurants a percentage fee (25%) based on the charge for the food delivered (Delivery Fee). Taxpayer’s mobile application is different from the POS platform.

The mobile application processes payments and calculates sales tax and Taxpayer’s fees for each transaction. Taxpayer retains its fee and submits the remaining money collected through the mobile application, including sales tax, to the restaurant.

Catering

Taxpayer’s catering manager coordinates and manages catering services between a client and a restaurant including ordering, scheduling, tracking, and payment. A restaurant downloads the POS platform onto its own hardware. Restaurants use the POS platform to upload catering menu items and pricing and view order information and instructions once a catering order is placed.

This allows clients to place an order for an event with Taxpayer and choose a restaurant, items, quantities, delivery time, and location. Clients are able to browse menus, prices, and order directly from Taxpayer’s catering website. Clients can also filter by cuisine, budget, and dietary restriction.

Taxpayer charges restaurants a minimum delivery fee up to a $150 maximum for Catering (Catering Fee), a Scheduling Fee, and a percentage-based fee of the order total (Order Total Fee). The POS platform processes payments and calculates sales tax and Taxpayer’s fees for each transaction. Taxpayer retains its fee and submits the remaining money collected through POS platform, including sales tax, to the restaurant.

Miscellaneous Fees

Taxpayer also charges restaurants a separate payment processing fee for each service offering at a various flat rate and percentage (Payment Processing Fee). A site management fee also applies if a restaurant does not provide plates, containers, napkins, condiments, and/or utensils at a Popup or Catering event (Site Management Fee). Taxpayer’s agreements state that it is registered and will calculate, collect, and remit sales tax for its services in 19 other states.

Questions, Rulings, and Analysis

Our restatements of your questions are shown below, followed by our responses and analysis.

Question One: Is Taxpayer a marketplace provider for purposes of Popup, Delivery, and Catering?

Ruling: Yes, Taxpayer is a marketplace provider for purposes of Popup, Delivery, and Catering. Taxpayer is required to collect and remit sales and use tax on transactions occurring through Taxpayer’s POS platform and mobile application.

Analysis: Texas imposes a sales tax on each sale of a taxable item in this state. Section 151.051 (Sales Tax Imposed). The term “taxable item” includes tangible personal property and taxable services. Section 151.010 (Taxable Item).

A marketplace is a physical or electronic medium through which persons other than the owner or operator of the medium make sales of taxable items. Section 151.0242(a)(1) (Marketplace Providers and Marketplace Sellers). A marketplace provider means a person who owns or operates a marketplace and directly or indirectly processes sales or payments for marketplace sellers. Section 151.0242(a)(2).

The Popup events constitute a marketplace as they are a physical medium through which restaurants can make sales of tangible personal property--food. Section 151.0242(a)(1); Section 151.009 (Tangible Personal Property). The mobile application for Delivery is also a marketplace as it is an electronic medium through which restaurants can sell food. See STAR Accession No. 202109055L (Sept. 17, 2021). Similar to Popup, Taxpayer creates a marketplace through Catering which allows restaurants to make bulk sales of food. In all service lines, Taxpayer operates a marketplace.

Additionally, Taxpayer processes payments either through its POS platform or mobile application. Therefore, Taxpayer satisfies the definition of a marketplace provider because it operates a marketplace and processes payments for restaurants.

As a marketplace provider, Taxpayer is required to certify to each restaurant that it assumes the rights and duties of a seller with respect to sales made by the marketplace seller through the marketplace. Section 151.0242(c)(1). Taxpayer is also required to collect and remit Texas sales and use tax on sales of food made at Popup or Catering events and made through the mobile application. Section 151.0242(c)(2)-(3).

Question Two: Are Taxpayer’s Popup Fee, Scheduling Fee, and Payment Processing Fee charged for its Popup service taxable?

Ruling: Yes, Taxpayer’s Popup Fee is taxable as the sale of date processing services. The Scheduling and Payment Processing Fee are taxable as part of the sales price of the taxable data processing service.

Analysis: Section 151.0035 (Data Processing Service) defines data processing services to include “word processing, data entry, data retrieval, data search, information compilation, payroll and business accounting data production, and other computerized data and information storage or manipulation.”

Rule 3.330(a)(1) (Data Processing Services) further defines data processing services as “the processing of information for the purpose of compiling and producing records of transactions, maintaining information, and entering and retrieving information.”

Section 151.0035(b)(3) excludes merchant credit card processing services from the definition of data processing services. A credit card processing service includes the settling of an electronic payment transaction by certain payment processors and financial institutions. See Section 151.0035(b)(3); STAR Accession No. 202406004M (June 27, 2024).

The “settling of an electronic payment transaction” is defined as the authorization, clearing, or funding of a payment made by credit card, debit card, gift card, stored value card, electronic check, virtual currency, loyalty program currency such as points or miles, or a similar method. Section 151.0035(c)(3).

The “settling of an electronic payment transaction” does not include charges by a marketplace provider, as that term is defined by Section 151.0242.

Section 151.007(a)(2) (Sales Price or Receipts) provides, in part, that the sales price of a taxable item means the total amount for which a taxable item is sold, valued in money, without deduction for the cost of the materials used, labor or service employed, interest, losses, or other expenses.

The POS platform’s functionality and reporting involve the computerized retrieval, storage, and manipulation of data. Taxpayer’s POS platform curates and schedules restaurants at client’s locations. The POS platform stores and provides various data manipulation including preloaded menus, views of upcoming events, time and temperature logs, QR codes, and site directions. The intelligent scheduling and meal prep data involve the computerized storage and manipulation of data to provide a plan for Popup events. The POS platform stores and manipulates data for each sales transaction that occurs as well as provides analytics and monthly reports that restaurants can use to evaluate Popup events. Therefore, the Popup Fee is a charge for taxable data processing services.

As stated in Ruling One, Taxpayer is a marketplace provider. As a marketplace provider, Taxpayer’s Payment Processing Fee is not excluded from the definition of data processing under Section 151.0035. See STAR Accession No. 202109055L. The Payment Processing Fee charged to restaurants is a charge for an expense that Taxpayer incurs to provide its taxable service. It is part of the sales price of the Popup Fee and is taxable as a data processing service. Section 151.0035 and Rule 3.330(d)(3); Section 151.007(a)(2).

Taxpayer’s Scheduling Fee is taxable as part of the sales price of taxable data processing services because it is also an expense incurred by Taxpayer. Section 151.007(a)(2).

Section 151.351 (Information Services and Data Processing Services) provides a 20 percent exemption for data processing services. Taxpayer is responsible for collecting and remitting sales and use tax on 80 percent of a fee charged to restaurants for using its POS platform.

Question Three: Are Taxpayer’s Order Total Fee, Scheduling Fee, Catering Fee, and Payment Processing Fee charged for its Catering service taxable?

Ruling Three: Yes, Taxpayer’s Order Total Fee is taxable as the sale of data processing. The Scheduling Fee, Catering Fee, and Payment Processing Fee are taxable as part of the sales price of the taxable data processing service.

Analysis: Like the Popup Fee, Taxpayer’s Order Total Fee covers the charges for providing the functionality offered by the POS platform, including managing the ordering, scheduling, tracking, and payment for an event. Catering allows clients to browse restaurants’ menus, prices, and order directly from Taxpayer’s catering website, which involves the computerized storage and manipulation of data. Therefore, the Order Total Fee is a charge for taxable data processing services.

The Scheduling Fee and Payment Processing Fee are taxable as part of the sales price for data processing as addressed in the Analysis to Ruling Two. Similar to these fees, the Catering Fee is also taxable as part of the sales price of taxable data processing because it is an expense incurred by Taxpayer in providing its taxable data processing service. Section 151.007(a)(2); STAR Accession No. 202109055L.

Question Four: Are Taxpayer’s Delivery Fee and Payment Processing Fee charged for its Delivery Service taxable?

Ruling Four: Yes, Taxpayer’s Delivery Fee is taxable as the sale of data processing services. The Payment Processing Fee is taxable as part of the sales price of the taxable data processing service.

Analysis: The Delivery Fee provides restaurants with use of the mobile application and its restaurant interface. The mobile application stores and retrieves restaurants’ data. The mobile application also creates orders, processes payments, and stores customers' credit card payment information. These activities performed for the Delivery Fee involve the compilation, storage, and manipulation of data for restaurants. Therefore, the Delivery Fee meets the definition of data processing service and is taxable. See STAR Accession No. 202109055L.

The Payment Processing Fee is taxable as part of the sales price for data processing as addressed in the Analysis to Ruling Two.

Question Five: Is Taxpayer’s Site Management Fee taxable?

Ruling Five: Yes, Taxpayer’s Site Management Fee is taxable.

Analysis: The Site Management Fee is a charge for providing plates, containers, napkins, condiments, and/or utensils and is taxable as the sale of tangible personal property. Restaurants may provide a resale certificate for the purchase of items that are transferred to a customer purchasing food or beverages. The items must not be reusable by the restaurant to qualify for exemption. Examples of items that may qualify for exemption include disposable paper or plastic plates, plastic utensils, disposable cups, and paper napkins. Rule 3.293(h)(5) (Food; Food Products; Meals; Food Service). See also Rule 3.293(k)(2).

Comptroller’s Decisions and STAR documents cited can be found on the Comptroller’s State Tax Automated Research (STAR) system. The Texas Tax Code, Texas Administrative Code, and the STAR system are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 20240306085105.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE

1 Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.