When were restaurant delivery charges and processing fees part of the taxable sales price of a meal?

Plain-English summary

The Florida Department of Revenue held that a restaurant-meal delivery charge was taxable when customers had no pickup option and therefore could not avoid the fee.

When pickup was available, a separately stated delivery charge was not part of the taxable meal price because the customer could avoid it by choosing pickup. Processing fees were part of the sales price and taxable in every instance.

The franchisee bought meals at a discount and resold them as its own business rather than acting as the restaurants' collection agent. It therefore had to remit the sales tax collected from customers directly to the Department.

What this means for you

Meal-delivery businesses

The tax result for delivery turns on whether the customer can avoid the separately stated charge by choosing pickup.

Restaurant and franchise accountants

Processing fees remained taxable, and the entity making the retail sale was responsible for remittance.

Common questions

Q: Was mandatory delivery taxable?
A: Yes.

Q: Was optional, separately stated delivery taxable?
A: No, when pickup let the customer avoid the fee.

Q: Were processing fees taxable?
A: Yes, in all instances addressed.

Citations and references

• Fla. Stat. §§ 212.02, 212.05, and 213.22
• Fla. Admin. Code r. 12A-1.045

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 14A-025

Original ruling text

Executive
Director
Marshall Stranburg

QUESTION: WHETHER DELIVERY CHARGES AND PROCESSING FEES ARE PART
OF THE SALES PRICE OF MEALS SOLD AND DELIVERED TO CUSTOMERS AND ARE
TAXABLE.
ANSWER: WHERE CUSTOMERS DO NOT HAVE AN OPTION TO PICK UP THE MEAL
FROM THE RESTAURANT, SINCE THE DELIVERY CHARGES CANNOT BE AVOIDED
BY DECISION OR ACTION ON THE PART OF THE CUSTOMER, THE CHARGES ARE
PART OF THE SALES PRICE OF THE MEAL AND ARE TAXABLE.
WHERE CUSTOMERS HAVE AN OPTION TO PICK UP THE MEALS IN LIEU OF
PAYING THE DELIVERY FEE, AND THE FEE IS SEPARATELY STATED ON THE
INVOICE, THE CHARGE IS NOT PART OF THE SALES PRICE OF THE MEAL AND IS
NOT TAXABLE. IN ALL INSTANCES, THE PROCESSING FEES ARE PART OF THE
SALES PRICE AND ARE TAXABLE.
October 17, 2014
Re:

Technical Assistance Advisement 14A-025
Restaurant Delivery Charges
Taxpayer Name: XXXX
Taxpayer ID Number: XXXX
Sales and Use Tax
Sections 212.05 and 212.02, Florida Statutes (F.S.)
Rule 12A-1.045, Florida Administrative Code (F.A.C.)

Dear XXXX:
This response is in reply to your letter to the Department, dated XXXX, in which you are
requesting the Department's issuance of a Technical Assistance Advisement ("TAA") pursuant to
s. 213.22, F.S., and Chapter 12-11, F.A.C., regarding whether the restaurant delivery charges and
processing fees are subject to sales tax imposed under Chapter 212, F.S. An examination of your
petition has established that you have complied with the statutory and regulatory requirements
for issuance of a TAA. Therefore, the Department is hereby granting your request for issuance
of a TAA.
ISSUE
Whether delivery charges and processing fees are part of the sales price of meals sold and
delivered to customers, and, therefore subject to tax.
Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Howard Moyes, Interim Director  Information Services – Damu Kuttikrishnan, Director

www.myflorida.com/dor
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
Page 2
FACTS
Taxpayer sells delivery service franchises under the trademarked name XXXX. As stated in
your letter, when a franchise is established, it enters into exclusive contracts with local
restaurants to provide third-party delivery services for food that would otherwise not be available
on a delivery basis.
As part of the agreement with the restaurants, each restaurant dictates what menu items will be
available and at what price. In addition to the menu price, the franchisee imposes an additional
delivery fee and a processing fee independently determined by the franchisee.
Through the franchisee website, the customer can order food from one (or several) of the
participating restaurants available. Once the customer chooses which menu item(s) they desire,
the order is placed on franchisee’s web portal and electronically communicated to the chosen
restaurant(s). Upon finalizing the order, the customer is billed by the franchisee for the price of
the food, sales tax, a separate processing fee for placing the order through the franchisee website,
and a separate delivery fee (if applicable). The food delivery services are provided by a non
related third-party.
It is noted that not all of the participating restaurants allow for a pick-up option. For the
participating restaurants that do allow customers to pick up their order, there is no delivery
charge imposed by the franchisee. From the money collected, the franchisee keeps the
processing fee and the delivery fee (if applicable) and withholds “as a commission” a percentage
of the value of the sales price of the food purchased. Pursuant to the sample contract provided,
the franchisee will receive a commission equal to 30% of the amount of revenue collected from
the restaurant’s food sales in delivery and coupons, and 20% for pick up food sales for the period
in which the collected amount is being remitted.
On a weekly basis, the franchisee remits to each restaurant the money collected for the sale of the
food, less the commission and the sales tax collected. The franchisee also remits the full delivery
fee to the third-party delivery company. Currently, the franchisee does not charge sales tax on
the processing fee or the delivery fee.
REQUESTED ADVISEMENT
You are requesting clarification on the following issues:
Should the franchisee charge sales tax on the delivery fee for those
restaurants that do not allow pick-up as an option, and if so, should the
franchisee charge sales tax on those that do allow pick-up as an option?
Should the franchisee charge sales tax on the separately itemized
processing fee?

Technical Assistance Advisement
Page 3
If the delivery fees and the processing fees are subject to sales tax, should
the franchisee remit the sales tax it collects directly to the Department of
Revenue, or may it forward it to the restaurants for them to remit?
You assert that the delivery and service fees are separate from the sale of meals and, therefore,
are not subject to sales tax. You state that there are two transactions that are occurring when a
customer places an order to purchase a meal: (1) the customer is ordering the food from the
restaurant, with the franchisee acting only as a conduit (or broker) for such order; and (2) the
customer is ordering the services offered by the franchisee, most notably the delivery service, but
also the convenience of having the franchisee place the order for the customer. You contend that
the delivery charge and the processing fee do not impact the price of the meal being sold and the
transaction can be restructured in a manner that would cause the delivery charge and the
processing fee to be nontaxable without impacting the sales price or the amount collected from
the customer.
LAW & DISCUSSION
Section 212.05(1)(a)1a., F.S., provides in part that:
It is hereby declared to be the legislative intent that every person is exercising a
taxable privilege who engages in the business of selling tangible personal property
at retail in this state ....
(1) For the exercise of such privilege, a tax is levied on each taxable transaction or
incident, which tax is due and payable as follows:
(a)1.a. At the rate of 6 percent of the sales price of each item or article of tangible
personal property when sold at retail in this state ….
Moreover, as provided in s. 212.15, F.S., taxes imposed under Chapter 212, F.S., are state funds
from the moment of collection. The tax is measured against the total sales price of the item sold.
Section 212.02(l5)(a), F.S., defines “Sale” as:
(a) Any transfer of title or possession, or both, exchange, barter, license, lease, or
rental, conditional or otherwise, in any manner or by any means whatsoever, of
tangible personal property for a consideration.
Section 212.02(16), F,S., defines “Sales price” in part as:
(16) “Sales price” means the total amount paid for tangible personal property,
including any services that are a part of the sale ….

Technical Assistance Advisement
Page 4
When services are rendered and charged to the customer as part of the total charge for the item(s)
sold, such services are also subject to tax, even though they may be separate charges on the
invoice or bill. A service can be defined as any duty or obligation necessary or required by the
seller to facilitate the sale of tangible items sold to the customer. In instances where the
transaction would be impossible or impractical without the service, sales tax is due on the
service. Transportation or delivery charges are examples of services typically sold in
conjunction with the sale of tangible personal property.
Rule l2A-1.045, F.A.C., provides in part:
(1) “Transportation charges” include carrying, delivery, freight, handling, pickup,
shipping, and other similar charges or fees.
(2) Transportation charges which are not separately stated on an invoice or bill of
sale, but are included in the sales price of taxable tangible personal property, are
subject to tax.
(3)(a) Where the seller agrees to deliver tangible personal property to some
designated place and the purchaser cannot elect to avoid the charge for
transportation services, the charge for the transportation service is subject to tax,
even if separately stated on an invoice or bill of sale.

(4)(a) The charge for transportation services is not subject to tax when both of the
following conditions have been met:

1. The charge is separately stated on an invoice or bill of sale; and
2. The charge can be avoided by a decision or action solely on the part of the
   purchaser ….
   Rule 12A-l .045, F.A.C., which deals with sales tax on transportation charges, recognizes the
   decisions in Florida Hi-Lift v Department of Revenue, 571 So.2d 1364 (Fla. 1st DCA 1990),
   and Department of Revenue v. B&L Concepts, 612 So.2d 720 (Fla. 5th DCA 1993).
   In Florida Hi-Lift v. Department of Revenue, the court found that the rental of equipment was a
   “sale”; that Rule 12A-1.045, F.A.C. was applicable; and that the transportation charges, while
   incidental to the sale, were not part of the total sales prices because the equipment lease was
   FOB lessor’s site, and the lessee had the option of picking up the equipment or having delivery
   made by the lessor.
   In Department of Revenue v. B&L Concepts, the court held that the proper line of demarcation
   was that if service charges or fees incidental to the sale or lease are imposed at the option of the
   seller, those service charges or fees are a part of the “sales price” and are subject to the sales tax,
   but if such service charges or fees are separately itemized and applied at the sole option or

Technical Assistance Advisement
Page 5
election of the purchaser, or can be avoided by decision or action on the part of the purchaser,
then those charges and fees are only incidental to the sale, are not part of the “sales price” and
are not subject to sales tax. Applying this line of reasoning, the court held that late fees and
delivery fees were to be excluded from the taxable “sales price,” since the late fees could be
avoided by the timely return of the rented items and because of the optional nature of the
delivery fee.
When the service is incidental to the sale, sales tax is not due on the service. In other words,
when the transaction (i.e., sale of taxable goods) is consummated prior to the point when the
service(s) becomes a part of the process, these services are not subject to tax.
CONCLUSION
With respect to the delivery charges where customers do not have an option to pick up the meal
from the restaurant, since the delivery charges cannot be avoided by decision or action on the
part of the customer, the charges are part of the sales price of the meal and are taxable. The term
“sales price” means the total amount paid for tangible personal property, including any services
that are a part of the sale. Here, the customer is purchasing a meal and the convenience of
having the meal delivered directly to them by the franchisee, and the charge cannot be avoided.
Even though the delivery of the meal is a service, it can not be treated separately from the sale of
the meal.
With respect to the sales of meals involving the delivery charges where pick-up is an option,
since the delivery charges are separately itemized and can be avoided by decision or action on
the part of the customer, the charges are not part of the sales price of the meal and are not
taxable. In all instances, the processing fees are part of the sales price and are taxable.
With respect to your question concerning whether the franchisee should remit the sales tax
collected directly to the Department of Revenue, the answer is “yes.” The franchisee is not
acting in the capacity of a conduit or agent for a restaurant to collect money from the customer.
According to the agreement between the taxpayer and the restaurants, the franchisee purchases
the meals at a discount (e.g., 30%) off the menu price. Revenue generated by the franchisee does
not belong to the restaurant and at no time does this revenue become the property of the
restaurant. Franchisee conducts its business, advertises, and collects revenue as a separate and
distinct legal entity, and not as a distributor or salesperson for participating restaurants. It is the
franchisee’s intent to attract public attention to it as a person in the business of selling to its
customers a variety of meals prepared by a variety of restaurants, to be delivered directly to the
customer. Accordingly, all taxes due from the purchasers must be remitted directly to the
Department of Revenue by the franchisee.
This response constitutes a Technical Assistance Advisement under s. 213.22, F.S. which is
binding on the department only under facts and circumstances described in the request for this
advice, as specified in s. 213.22, F.S. Our response is predicated on those facts and the specific

Technical Assistance Advisement
Page 6
situation summarized above. You are advised that subsequent statutory or administrative rule
changes or judicial interpretations of the statutes or rules upon which this advice is based may
subject similar future transactions to a different treatment than expressed in this response.
You are further advised that this response, your request and related backup documents are public
records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions
of s. 213.22, F.S. Confidential information must be deleted before public disclosure. In an effort
to protect confidentiality, we request you provide the undersigned with an edited copy of your
request for Technical Assistance Advisement, the backup material and this response, deleting
names, addresses and any other details which might lead to identification of the taxpayer. Your
response should be received by the Department within 15 days of the date of this letter.
If you have any further questions with regard to this matter and wish to discuss them, you may
contact me directly at (850) 717-7202.
Sincerely,

Richard R. Parsons
Tax Law Specialist
Technical Assistance & Dispute Resolution
(850) 717-7202
Record ID: 149999