Pizza Delivery Charges and Sales Tax

A new class action law suit was filed May 5 in Illinois by lead plaintiff Zachary Tucker of Wood River against Papa John’s Pizza. Tucker claims that he was charged a “$2.39 delivery fee, plus an additional 16 cents in sales tax for the non-taxable delivery service.” But why can Tucker and other plaintiffs claim that they deserve to be refunded the sales tax they paid on the delivery service? And what does your business need to know in this situation? An article from the Madison Record explains a bit about the thinking behind this lawsuit:  The suit claims that sales tax may only be imposed on the total sales price of taxable tangible property.

The sales price is the total amount paid for tangible goods including services that are part of the sale; however, when a customer has the option to either pick up goods or have the goods delivered – as is the case for all Papa John’s orders – a seller may not legally charge sales tax on a separate charge for delivery where the cost of delivering the merchandise is equal to or exceeds the delivery fee, the suit claims, In another class action lawsuit, lead plaintiff Nancy Kean sued Walmart for the sales tax she was charged on a trampoline that she ordered from Walmart.com. This case set some historic interpretations for Illinois sales tax law, so Tucker and his attorneys are building their argument on it.  Read more about the Walmart case. In short, the courts ruled that Walmart was justified in charging sales tax on the shipping charges, even though Walmart does offer in-store pickup.

Connecticut also takes this position, and so does Arkansas, as do a number of other states. We’ll soon know whether pizza delivery is enough like trampoline delivery to sway the courts. Some states specifically say that taxes can’t be collected on shipping if shipping is a separately-listed charge. So what do you need to know for your business? Once again, sales tax is complex. Make sure to check with a specialist when you have a thorny question to answer. For everyday sales tax, make your life simple by letting SalesTaxDataLINK deal with the complexities. Ours is the only solution that double-checks for accuracy. Contact us today and let us impress you!

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