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The New York Department of Taxation and Finance ruled in Advisory Opinion No. TSB-A-14(27) S (August 20, 2014) that an Internet service provider to restaurants is not a vendor or co-vendor on restaurant sales for New York sales tax purposes, and the service fees it charges to its clients are not subject to sales tax.



The petitioner operates a website through which customers can order and pay for meals from restaurants. The taxpayer services approximately 5,000 restaurants in over 27 cities and two countries. The price charged for the meals includes sales tax. The money received from the customer is remitted to the restaurant less service fees. The restaurant is then responsible for remitting sales tax initially collected by the website to the appropriate taxing authority. The restaurants deliver the meals and are solely responsible for maintaining possession, control and care of all items being offered for sale on the petitioner’s website.

The restaurants are charged a one-time activation fee, menu update fee, and a fixed monthly marketing partnership fee to display general information about the restaurant on the website. If a customer has an issue with food or delivery, customers are instructed to contact the restaurant directly.

The department found that the petitioner is not required to collect sales tax pursuant to Tax Law § 1105 (d). It is not operating a restaurant, catering or similar establishment. The petitioner’s business activities are Internet advertising services and ancillary restaurant services. These business activities or services do not make the taxpayer a vendor of restaurant sales for purposes of the New York sales tax collected from the customer. However, in evaluating the petitioner’s scheme of assessing sales tax, the Commissioner reserved the right to collect sales tax from the petitioner, if the petitioner failed to remit to a restaurant the full New York sales tax.

Business entrepreneurs or investors considering a similar business arrangement should consult with tax advisors in order to structure their services so they are not subject to sales tax, and if they are charged with collecting sales tax on behalf of the ultimate vendor, that this money is properly collected and remitted to such vendor.