Must an online marketplace collect Georgia sales tax when independent chefs prepare meals at customers' homes and the marketplace takes a service fee?

Plain-English summary

The online marketplace was a dealer selling taxable prepared meals. It offered the chefs' menus and prices, coordinated scheduling, invoiced customers, collected all meal payments, handled questions and disputes, and then paid the independent chefs after retaining its service fee.

Using independent contractors to buy ingredients, cook, serve, and clean up did not change the transaction into a nontaxable service. The customer was buying a prepared meal in a transaction comparable to a restaurant or caterer sale. The marketplace therefore had to collect and remit tax on the full meal sales price without deducting its service fee.

Common questions

Q: Did the marketplace's lack of a food license or permit make the meal sale nontaxable?

A: No. The Department said it was a sales-tax dealer even if it was not itself a licensed food sales or food service establishment.

Q: Did paying chefs as independent contractors change the result?

A: No. The ruling focused on the complete prepared-meal transaction offered and collected by the marketplace.

Citations and references

• O.C.G.A. § 48-8-2(3) -- dealer definition
• O.C.G.A. §§ 48-8-33, 48-8-35 -- dealer collection duty
• Ga. Comp. R. & Regs. r. 560-12-2-.65 -- prepared-food sales
• O.C.G.A. §§ 26-2-25(a), 26-2-371 -- food licensing and permitting

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2015-08

Original ruling text

Date Issued:
June 16, 2015
Georgia Letter Ruling: LR SUT-2015-08
Topic: Food
This letter is in response to your letter ruling request regarding the application of Georgia sales and use tax to certain
charges made by Taxpayer.
Facts as Presented by Taxpayer
Taxpayer is an online marketplace for personal chefs and caterers (“Chefs”). Taxpayer hires Chefs to provide meals
and related services (“Meals”) to clients at their homes or other venues. Taxpayer provides payment processing,
website hosting, marketing, and related services for the Chefs. Chefs are compensated based on the price of the Meals,
and Taxpayer collects a service fee on all scheduled Meals. Taxpayer does not hold a food sales license with the
Georgia Department of Agriculture or a food service permit with any county board of health or the Georgia
Department of Public Health.
A typical transaction is as follows:
1.
2.
3.
4.
5.

The client signs up for a free account on Taxpayer’s website.
The client selects a date, type of cuisine, Chef(s), and Meal(s).
Once the Chef(s) accepts the requested Meal(s), the client is directed to a payment screen on Taxpayer’s
website with an invoice for the Meal(s), and the client submits payment to Taxpayer.
Taxpayer receives the client’s payment, collects the service fee, and transmits the remaining funds to the
appropriate Chef(s).
The Chef(s) purchases the food ingredients and other items and prepares the requested Meal for the client on
the date and at the location specified by the client.

Taxpayer’s website features a food menu for each Chef that details the Meal offerings, including each Meal’s title,
description, and price. All client payments are made to Taxpayer; no payments are made directly to the Chefs, other
than optional gratuity. Taxpayer also receives and responds to client questions, special requests, and disputes. The
Chefs are independent contractors with their own general liability insurance and control over their hours. The Chefs
determine the price of the Meals based on their costs and have all the tools and equipment necessary to prepare the
Meals. Even though the client pays an invoice on Taxpayer’s website for “Meals”, Taxpayer takes the position that it
is not engaged in the retail sale of meals but is providing a nontaxable service only.
Issue
In the situation presented, are the separately itemized charges for Meals subject to tax?
Analysis
Georgia levies and imposes a tax (subject to certain exemptions) on the retail purchase, retail sale, rental, storage, use,
or consumption of tangible personal property and on certain enumerated services. 1 “Retail sale” means a sale of
tangible personal property or taxable service to any person other than for resale. 2 “Sale” means any transfer of title or
possession, exchange, barter, lease, or rental, conditional or otherwise, in any manner, or by any means of any kind of
tangible personal property for a consideration.3 Retail sales of food and food ingredients by restaurants, hotels, clubs,
cafes, caterers, boarding houses, and others are taxable.4
Every person making a sale of tangible personal property at retail in this state shall be a dealer and shall be liable for
a tax on the sale at the rate of 4 percent of the sale price.5 The dealer must collect the tax from the purchaser or

1

O.C.G.A. §§ 48-3-1 and 48-8-30.
O.C.G.A. § 48-8-2(6)(A).
3
O.C.G.A. § 48-8-2(33)(A).
4
Ga. Comp. R. & Regs. r. 560-12-2-.65.
5
O.C.G.A. § 48-8-30(b)(1).
2

Date Issued: June 16, 2015
Georgia Letter Ruling: LR SUT-2015-08
Topic: Food
Page 2 of 3

consumer and pay the tax over to the Department.6 The dealer shall add the tax to the sale price or charge.7 Any dealer
who neglects, fails, or refuses to collect the tax upon a retail sale of tangible personal property made by him shall be
liable for and shall pay the tax himself.8 “Dealer” is defined to include anyone who:
“(G) Sells at retail, offers for sale at retail, or has in his possession for sale at retail, or for use,
consumption, distribution, or storage for use or consumption in this state tangible personal property;
(H) Solicits business by an agent, employee, representative, or any other person;
(I) Engages in the regular or systematic solicitation of a consumer market in this state, unless the
dealer's only activity in this state is:
(i) Advertising or solicitation by:
(I) Direct mail, catalogs, periodicals, or advertising fliers;
(II) Means of print, radio, or television media; or
(III) Telephone, computer, the Internet, cable, microwave, or other communication system
. . .”9
Entities selling food are typically subject to certain permitting and/or licensing requirements. Georgia law requires
that, before beginning operations, a food sales establishment must obtain a license with the Georgia Department of
Agriculture, and a food service establishment must obtain a permit from the county board of health or the Georgia
Department of Public Health.10 The term “food sales establishment” means
“retail and wholesale grocery stores; retail seafood stores and places of business; food processing
plants, except those food processing plants which are currently required to obtain a license from the
Commissioner under any other provision of law; bakeries; confectionaries; fruit, nut, and vegetable
stores or roadside stands; wholesale sandwich and salad manufacturers . . . and places of business
and similar establishments, mobile or permanent, engaged in the sale of food primarily for
consumption off the premises.”11
The term “food service establishment” means
“establishments for the preparation and serving of meals . . . or other edible products either for carry
out or service within the establishment . . . [including] restaurants; coffee shops; cafeterias; short
order cafes; luncheonettes; taverns; lunchrooms; places which retail sandwiches or salads; soda
fountains; institutions, both public and private; food carts; itinerant restaurants; industrial cafeterias;
catering establishments; and similar facilities by whatever name called.” 12

6

O.C.G.A. § 48-8-33.
O.C.G.A. § 48-8-35.
8
Id.
9
O.C.G.A. § 48-8-2(3).
10
It shall be unlawful for any person to operate a food sales establishment without having first obtained a licenses
from the Commissioner [of Agriculture]. O.C.G.A. § 26-2-25(a). It shall be unlawful for any person to operate a food
service establishment without having first obtained a valid food service establishment permit. Such permits shall be
issued by the county board of health or its duly authorized representative, subject to supervision and direction by the
Department of Public Health; but, where the county board of health is not functioning, such permit shall be issued by
the Department of Public Health. O.C.G.A. § 26-2-371.
11
O.C.G.A. § 26-2-21(a)(5).
12
O.C.G.A. § 26-2-370.
7

Date Issued: June 16, 2015
Georgia Letter Ruling: LR SUT-2015-08
Topic: Food
Page 3 of 3

Even if Taxpayer is neither a food sales establishment nor a food service establishment and is not required to obtain a
license or permit, the Department considers Taxpayer to be a dealer engaged in the retail sale of meals. Taxpayer
qualifies as a dealer by offering tangible personal property (Meals) for sale at retail and by soliciting business from
consumers in Georgia. Taxpayer simply contracts with Chefs to prepare the Meals that customers purchase from
Taxpayer. Although the Chefs determine the price of the Meals, Taxpayer advertises and offers the Meals and their
corresponding prices via Taxpayer’s online menus, and coordinates the sale of the Meals, including scheduling, billing,
and collecting payment. Customers pay Taxpayer directly for the Meals at the time their request is confirmed and do
not pay any additional amounts upon receiving the Meals, except an optional gratuity to the Chefs.
Taxpayer’s transactions are virtually the same as a restaurant or catering business in that the customer is purchasing a
prepared meal. Although in Taxpayer’s case the meal is prepared and served at the customer’s home or other venue,
Taxpayer is ultimately offering and providing a prepared meal to the customer in the same manner as a restaurant or
caterer. In each case (restaurant, caterer, Taxpayer), (i) the customer is offered various food items for purchase; (ii)
the customer selects the food they want; (iii) a third party acquires or has already acquired the appropriate ingredients
and then prepares and serves the food to the customer; and (iv) the third party cleans up after the customer is finished.
Whether the actual preparation of the meal and clean up after the meal are performed by an employee or independent
contractor in each case (restaurant, caterer, Taxpayer), all of the activities involved in the sale of a prepared meal must
be performed in order to provide the end product and to complete the transaction. The performance of these various
activities does not make the overall transaction a service transaction.
Ruling
The actions by Taxpayer amount to making sales of tangible personal property. Thus, Taxpayer’s itemized charges
for Meals are subject to the tax. Taxpayer is responsible for collecting and remitting Georgia sales tax on the sale price
of the Meals without deductions for its service fees.
The opinions expressed in this ruling are based upon the information contained in your request and limited to the
specific transactions, facts, circumstances and taxpayer in question. Should the circumstances regarding the
transactions change or differ materially from those represented, this ruling may become invalid. In addition,
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 tax treatment than that expressed in this ruling.