Does a food-delivery platform have to collect and remit Missouri sales tax on restaurant orders and delivery fees?

Plain-English summary

The Missouri Department of Revenue ruled that an online food-delivery platform (the "Applicant") does not need to collect and remit Missouri sales tax on the food and beverage orders it facilitates between diners and in-state restaurants. The restaurants themselves remain the sellers responsible for charging, collecting, and reporting sales tax on those transactions.

The Applicant runs a platform where diners browse participating restaurants, place orders, and either pick up the food themselves or pay an added delivery fee to have it delivered. When a restaurant handles its own delivery ("Restaurant Delivery"), the restaurant keeps the delivery fee. When the Applicant arranges delivery through an independent third-party driver ("Applicant-Facilitated Delivery"), the Applicant keeps the delivery fee instead. Either way, the customer's card is charged for the food, any delivery fee, and applicable tax, and the Applicant passes the food-price portion (plus any restaurant-collected delivery fee and tax) on to the restaurant. The Applicant has no property, employees, or place of business in Missouri and does not prepare food itself.

The Department addressed two separate questions. First, on the underlying food and beverage sales, the Applicant is not required to collect or remit sales tax -- the Department likened its role to that of a credit card company or financial institution simply processing payment on behalf of the actual seller (the restaurant), which keeps the primary tax reporting and remittance duty under Sections 144.020.1(1) and 144.021, RSMo. Second, on the delivery fees the Applicant itself collects and retains, those fees are also not taxable, because they are optional (a diner can avoid the fee entirely by picking up the order) and are billed as a separately stated charge apart from the price of the food -- fitting squarely within the delivery-charge exclusion in Section 144.010.1(4), RSMo.

What this means for you

Food-delivery platforms and marketplace facilitators

If your platform's role is limited to connecting diners with restaurants, processing payment, and passing along the food-sale proceeds (and any restaurant-collected delivery fee) to the restaurant, this ruling indicates you are not required to collect or remit Missouri sales tax on those underlying food sales -- the restaurant remains the seller of record. However, if you keep a delivery fee for facilitating delivery through your own third-party drivers, that fee escapes tax only because it is optional (the diner has a real pickup alternative) and is separately stated from the food price. A mandatory delivery charge, or one folded into the total price, would not get the same treatment under Section 144.010.1(4), RSMo.

Restaurants that list on delivery platforms

This ruling does not shift your tax responsibilities. Even though a platform like the Applicant processes the payment, your restaurant remains the seller with the primary obligation to charge, collect, and remit Missouri sales tax on food and beverage sales made through the platform, per Sections 144.020.1(1) and 144.021, RSMo. Confirm your agreement with any delivery platform properly accounts for this, since the platform may only be transferring collected tax to you rather than remitting it on your behalf.

Accountants and tax professionals

When analyzing a delivery-facilitation arrangement, look closely at who actually controls pricing and who is contractually the seller of the food -- here the restaurants set food prices, confirmed orders, and were contractually obligated to remit collected taxes themselves, which supported treating the Applicant like a payment processor rather than a retailer. Separately, apply Section 144.010.1(4)'s delivery-charge exclusion carefully: it protects only delivery charges that are both usual and customary and stated separately from the sale price, and here the fee's optional nature (avoidable by pickup) reinforced that it wasn't just a disguised part of the sale price.

Common questions

Q: Does a food-delivery app have to collect and remit Missouri sales tax on the restaurant orders it processes?
A: No, according to this ruling. The restaurants that actually sell the food and beverages remain the sellers with the primary sales-tax reporting and remittance obligation under Sections 144.020.1(1) and 144.021, RSMo. The Applicant's role was compared to that of a credit card company or financial institution -- receiving and processing funds on behalf of the restaurant -- which does not itself trigger a collection or remittance duty.

Q: Are the delivery fees charged to diners taxable?
A: No. The Department found the delivery fees were not mandatory -- diners could avoid them entirely by picking up their order at the restaurant -- and they were stated separately from the price of the food. Section 144.010.1(4), RSMo, excludes usual and customary delivery charges from sales tax when stated separately from the sale price, so the fees were not taxable.

Q: Does it matter who actually keeps the delivery fee -- the restaurant or the platform?
A: Not for taxability. The ruling describes two scenarios: "Restaurant Delivery," where the restaurant keeps the delivery fee, and "Applicant-Facilitated Delivery," where the Applicant keeps it. In both cases, the delivery fee itself is treated the same way -- excluded from sales tax because it is optional and separately stated.

Q: If the platform isn't collecting the tax, who is responsible for making sure it gets paid?
A: The restaurants are. The ruling notes that restaurants contractually agree to remit the taxes collected to the state on their own behalf as the seller of the underlying food and beverage. The Applicant's lack of a collection or remittance obligation does not reduce the restaurants' existing responsibility to charge, collect, and report Missouri sales tax.

Q: Can another delivery platform rely on this ruling for its own operations?
A: Not automatically. This is a Missouri letter ruling, binding on the Department only with respect to the requesting Applicant, only for three years from its date, and only so long as the facts and underlying law remain unchanged. A different platform -- especially one that prepares food itself, maintains a Missouri presence, or structures fees differently -- should confirm its own facts match before relying on this outcome, and should consult a tax professional.

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8244

Original ruling text

Dear Applicant:

This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated April 12, 2023.

The facts as presented in your letter ruling request, as well as communications with you, are summarized as follows:

Applicant operates an online platform that connects restaurants with potential Diners for a restaurant's sale of food and beverage. Before being listed on the platform, the Applicant and restaurants enter into an agreement whereby the Applicant agrees to provide marketing, order and delivery facilitation services to restaurants located in Missouri. Once listed on the platform, restaurants display their menus and attract additional Diners for their take-away and meal delivery services. In all instances, the restaurants listed on the Applicant's platform that are displayed for a Missouri-located Diner have brick-and-mortar business locations in the state.

Diners may browse local restaurants, review menus, read comments and ratings from other users and place orders with restaurants via the Applicant's platform. Once a Diner selects their food and beverage, the order is provided to the restaurant. The restaurant confirms the order and begins preparing the food. The Diner can choose to either pick up the order at the restaurant's business location, or have it delivered to a location of the Diner's choosing. When a Diner chooses the delivery option, an additional delivery fee is added to the customer's bill for the delivery service. If a Diner chooses to pick up the food from the local restaurant no delivery fee is charged.

In some instances, a restaurant employs its own delivery drivers or arranges for delivery itself through a third party other than the Applicant ("Restaurant Delivery"). For Restaurant Delivery orders, the restaurant will receive the delivery fee paid by the Diner. In others, the Applicant facilitates delivery via an independent third-party contractor driver ("Applicant-Facilitated Delivery"). On Applicant-Facilitated Delivery orders, the Applicant retains the delivery fee paid by the Diner.

Once a restaurant confirms an order, the customer's credit card or PayPal account is charged for the selected items, any delivery fee (if applicable) and all applicable taxes. Once collected, the order subtotal, the delivery fee (if the restaurant performed the delivery service), and all tax imposed thereon are remitted to the restaurant.  The restaurant contractually agrees to remit the taxes collected to the state on its own behalf as the seller of the underlying food and beverage.

The Applicant does not maintain any property or have any employees in Missouri, and has no place of business in Missouri, and the Applicant is not a food preparation entity.

ISSUE 1 :

Does the Applicant need to collect and remit sales taxes on sales to Missouri Diners, from in-state (Missouri) restaurants?

RESPONSE 1 :

No. The Applicant is not required to collect and remit sales taxes on deliveries made to Missouri Diners from in-state restaurants.  The Applicant may transfer sales taxes collected on behalf of Missouri restaurants to those restaurants, but those Missouri restaurants are the sellers with primary reporting and remittance obligations under Missouri sales tax law.

Section 144.020.1(1) RSMo, imposes a sales tax upon retail sales of tangible personal property.

Section 144.021. RSMo, imposes the primary sales tax burden upon the seller with respect to retail sales of tangible personal property.

In this instance, the position of the Applicant is similar to that of a financial institution or credit card company, in that the Applicant is receiving and processing funds (for food, drink, and properly assessed taxes) taken on behalf of a selling restaurant.  In filling this role, the Applicant is not required to collect or remit taxes in much the same way that credit card companies are not required to collect or remit sales taxes on payments facilitated by those credit card companies.  The Applicant's lack of a reporting or remittance obligation in no way limits the reporting or remittance requirements imposed upon Missouri restaurants, who must still charge, collect, and report sales taxes on transactions facilitated by the Applicant.

ISSUE 2 :

Are delivery fees paid by Missouri Diners, and collected by the Applicant, subject to Missouri sales and use taxes?

RESPONSE 2 :

No. Based upon the facts supplied by the Applicant, the delivery fees are not mandatory, and the delivery fees are not subject to Missouri sales and use taxes.

Section 144.010.1(4) RSMo, excludes delivery charges from sales taxes when those charges are usual and customary delivery charges stated separately from the sale price of any taxable goods. A delivery fee is an optional fee paid (and stated) separately from the price of the good being delivered.

The delivery charges are optional, and are not mandatory, based upon the facts provided by the Applicant.  A Diner can avoid paying a delivery fee by picking up the food and drink themselves.  As such, the separately stated delivery charges collected by the Applicant are not subject to sales tax.

This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

Should additional information be needed, please contact Legal Counsel Nathan Jefferson, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.

Sincerely,

Wayne Wallingford