Connecticut State Department of Revenue Services

Ruling 2018-1, Sales and Use Taxes, Resale of Meals, Delivery Charges

FACTS:

      A food delivery business (“Delivery Company”) purchases meals from a chain of restaurants (the “Chain”) and resells and delivers the meals to customers. A customer places a meal order directly with the Delivery Company, which transmits the order to the Chain. The Delivery Company purchases the meals from the Chain at a discounted price. The Delivery Company then resells the meals to customers at the price listed on the Chain’s menu, plus a delivery fee.

ISSUES:

  1. Is the Chain required to collect sales tax on the sale of the meals to the Delivery Company?
  2. Is the Delivery Company required to collect sales tax on the meals it sells to its customers?
RULINGS:
  1. The Chain does not need to collect sales tax on the sale of the meals to the Delivery Company if the Delivery Company provides the Chain with a resale certificate.
  2. The Delivery Company must collect sales tax on the meals that it sells to its customers and include the delivery fee in its gross receipts. The Delivery Company can provide a resale certificate to the Chain to purchase the meals without paying sales tax.
DISCUSSION:

      Sales and use taxes are imposed on the sale of all tangible personal property, unless specifically exempt. Conn. Gen. Stat. § 12-407(a)(2). All gross receipts are presumed to be subject to sales and use taxes until the contrary is established. Conn. Gen. Stat. § 12-410(1); Conn. Gen. Stat. § 12-411(9).

      Sales tax is specifically imposed on the furnishing, preparing, or serving for a consideration of food, meals or drinks. Conn. Gen. Stat. § 12-407(a)(2)(E). A regulation provides more details about the taxation of meals:

Meals sold by eating establishments or caterers are subject to sales tax. The measure of the tax is the gross receipts from the sale of meals.

(1)    Meals. For purposes of this regulation, “meals” mean food products for human consumption sold in such form and such portions that they are ready for immediate consumption and are of a type normally consumed on or near the location of the seller.

“Meals” include items described in the preceding sentence [that] are sold on a take-out basis.

(2)   Eating Establishment. For purposes of this regulation, “eating establishment” means a place where meals are sold and includes a cafeteria; catering hall; coffee and donut shop; fast food restaurant, including one selling items such as fish and chips, fried chicken pieces, hamburgers, etc.; ice cream shop; luncheonette; mobile food truck or cart, including one selling items such as coffee, ice cream, pastry, sandwiches, etc.; pizzeria; refreshment stand, including one located at a place such as an amusement park, bowling alley, stadium, theatre, etc.; restaurant; sandwich shop; snack bar; and a vending machine.

Conn. Agencies Regs. § 12-426-29(c).

      The Delivery Company maintains the website presence where the meals are sold to its customers and is a retailer of the meals that it purchases from the Chain. The Delivery Company must register as a retailer and remit the tax it collects to the Department of Revenue Services on the meals it resells. The Delivery Company may provide a resale certificate to the Chain to purchase the meals without paying sales tax. For meals sold by the Delivery Company, the delivery charge must be included in the taxable gross receipts for the meals because the definition of “gross receipts” expressly includes any charges by the retailer to the purchaser for shipping or delivery. Conn. Gen. Stat. § 12-407(a)(9)(A)(iii).

LEGAL DIVISION May 15, 2018