Important Sales Taxes Change Impacts Restaurants

Effective April 1, 2020 Georgia restaurants are required to comply with new sales tax rules. Beginning April 1 when Georgia restaurants sell to consumers via delivery companies such as Uber Eats, the sales tax is collected by the delivery company and NOT the restaurant. Under the new sales tax rules, delivery companies are now Marketplace Facilitators meaning they process customer payment and facilitate delivery of the food. Sales to Marketplace Facilitators are still reported on the restaurant’s monthly sales tax return (Form ST-3) but the sales are listed on line 2 of the sales tax return as “Total Exempt State Sales”.

Sales Tax Q and A

Following are some questions and answers about these new sales tax rules:

Q: My delivery company is a Marketplace Facilitator but says they are exempt from GA sales tax. Is that true?

A: No. Effective April 1, 2020, Marketplace Facilitators are required to collect Georgia sales tax when facilitating sales on behalf of marketplace sellers (that is, restaurants).

Q: My delivery company only charges a delivery fee. I collect the sales proceeds from the customers. Must my delivery company pay sales tax on my sales?

A: No. This new system of sales tax only applies to delivery companies that are Marketplace Facilitators, that is, they process customer payment and facilitate delivery.

Q: My delivery company says they are transitioning to the new sales tax requirements. Can I pay sales tax on food sales until they are ready to comply?

A: Yes, but with two cautions. First, restaurants should ensure that their delivery company (Marketplace Facilitator) understands they are only remitting tax as a courtesy, for a limited period of time.  Second, restaurants should NOT accept or pay sales tax on any mark-up and any service charges added by the delivery company. Sales tax on those add-ons remain the responsibility of the delivery company. Pay sales tax only on the price of the meal to the delivery company.

Q: What delivery companies are marketplace facilitators and agree to comply with these new rules?

A: Uber Eats and Postmates both say they will follow the new GA sales tax rules. We contacted other delivery companies about their GA sales tax plans but did not receive a reply.

Q: How do I protect my restaurant from a sales tax assessment if I am audited?

A: Get a GA Sales Tax Certificate of Exemption (Form ST-5) from the delivery company. Delivery companies subject to GA sales tax are required to provide this document.

Q: Do I have to monitor my delivery companies to be sure they are paying GA sales tax?

A: No. Marketplace Facilitators are required to collect Georgia sales tax on sales facilitated on behalf of marketplace sellers, i.e., restaurants.

Q: One of my delivery companies will not comment or will not comply with the new sales tax rules. Should I be concerned?

A: Yes. A future sales tax dispute could jeopardize your relationship with the delivery company and possibly with your customers.

Q: How do I get more information?

A: Check the GA DOR Website (www.dor.ga.gov), especially Policy Bulletin SUT-2020-01 Marketplace Facilitators (https://dor.georgia.gov/sales-tax-bulletin-marketplace-facilitators)

Robert Wagner is a retired restaurant CPA. He can be reached at bob@rwemeritus.com