Tennessee: Marketplace Qualifies as a Delivery Network Company

The Tennessee Department of Revenue recently ruled that a taxpayer that facilitated sales for restaurants was considered a “delivery network company” excluded from the statutory definition of a marketplace facilitator. Effective October 1, 2020, the definition of sale includes, any sale “made or facilitated by a marketplace facilitator,” and the definition of dealer includes a person that “acts as a marketplace facilitator.” A marketplace facilitator that meets the state’s economic nexus threshold is responsible for collecting and remitting sales and use tax.  A “delivery network company,” which is defined as a “business entity that maintains an internet website or mobile application used to facilitate delivery services for the sale of local products,” is excluded from the definition of a marketplace facilitator.  “Delivery services” include the pickup of local products from a local merchant and delivery to a customer but do not include “any delivery requiring over fifty miles of travel from the local merchant to the customer.” A local merchant includes a business such as a restaurant, kitchen, or grocery store “that is not under common ownership or control with the delivery network company.”

The Department determined that the taxpayer was facilitating deliveries for restaurants because it made the delivery services easier by allowing customers to access its online forum regardless of whether the taxpayer’s independent contractors or the sellers made the deliveries. As such, the Department ruled that the taxpayer was a delivery network company, as long as the deliveries that it facilitated were within fifty miles of the sellers (the restaurants), and the sellers were  not under common ownership or control with the taxpayer.  Please contact Justin Stringfield at 615-248-5510 with questions on Revenue Ruling 20-13.