The U.S. Supreme Court issued its decision in South Dakota v. Wayfair in the summer of 2018, but the ripple effect of that monumental verdict continues to be felt across the country. Thirty-five states have since adopted new economic nexus standards to impose sales and use tax obligations on remote sellers, i.e. businesses that sell to customers using the internet or telephone but don’t actually maintain a physical presence in the state.
At the same time, more and more states are also adopting “marketplace facilitator” collection laws. A marketplace facilitator is a business that contracts with third parties to sell goods and services on its platform. Facilitators enable sales by listing products, taking payments, collecting receipts and even assisting in shipments. These new laws require the facilitator to then collect and remit sales tax on behalf of the sellers.
This nationwide trend to enforce sales tax on online purchases is creating unexpected compliance issues in the food and beverage industry. Fast food giant Wendy’s, for example, is asking third-party delivery services like DoorDash, Postmates and UberEats to abide by the ever-expanding marketplace facilitator laws. State rules regarding facilitation are often written in ways that would include these platforms, but according to Wendy’s Manager of Indirect Tax Tia Stern, none of the big delivery services quite know how to implement it yet. “I think restaurants and food delivery businesses were not meant to get caught up in marketplace facilitation,” notes Stern. “But here we are.”
So who’s on the hook for ensuring sales tax is properly calculated, collected and remitted? In the event that sales tax appears to be calculated incorrectly, Ohio will audit the facilitators, says Sara Caldwell, legal counsel from the Ohio Department of Taxation. But under Ohio law, like many other states, sellers like Wendy’s are required to provide “sufficient and accurate information” to an online marketplace to make sure taxes are properly collected and remitted. This includes not only state sales tax, but also any local food and beverage taxes.
Until the wrinkles are ironed out, restaurants will need to play a very active role in ensuring these tax obligations are communicated and followed both in-house and via third-party platforms. For questions or concerns regarding state sales and use tax compliance, contact your tax advisor or the Schneider Downs State and Local Tax group.
