Arkansas: Commission not taxable; food delivery business required to collect sales tax

The Arkansas Department of Finance and Administration recently issued a legal opinion concluding that commissions received from restaurants by a food delivery service provider were not taxable, but that the provider was required to collect and remit tax on sales of food ordered through its online platform. The taxpayer’s website allowed consumers to order food from listed restaurants. The orders were delivered to customers by a contracted individual. On a bi-weekly basis, the taxpayer remitted the amounts paid by consumers for food to the restaurants, plus applicable sales tax. In a separate transaction line on the invoice, the taxpayer charged restaurants a 20 percent commission. Revenue Legal Counsel first determined that the commission was not subject to sales tax because the taxpayer was not providing an enumerated service when it listed a restaurant’s food items on its website for delivery. With regard to the sale of food items, the Revenue Legal Counsel concluded that, under the state’s marketplace facilitator law that went into effect on July 1, 2019, the taxpayer was required to collect and remit the sales tax. In Revenue Legal Counsel’s view, the taxpayer was a marketplace facilitator because it was listing tangible personal property (i.e., food) on a forum, and collecting payment on behalf of a restaurant. Revenue Legal Counsel next advised that the foods sales should be sourced to the location where the purchaser receives the food. For more information, on Opinion 20200301 please contact Michael Andruchek at 214-840-2467.