Sales Tax, Control, and Unintended Consequences
The Supreme Court decision that allow states to compel online sellers to collect sales taxes made for some surprises. States want to be able to control sales tax laws because tax regulations allow control in general. You can encourage the industries you want in your state by carefully crafting laws that favor those industries.
But then there are the unintended consequences.
In some states, fast food joints are falling into the category of marketplace facilitators. Marketplace facilitators are usually places like Etsy, Amazon, or eBay that let individuals sell goods through their marketplace. Different states have different rules for Walmart.com or other marketplaces, and the bigger companies are fighting back in court.
Wendy’s has been surprised to find itself in the middle of this. People can order their Baconator combos online and have them delivered by DoorDash or a similar service. Wendy’s figures DoorDash should be responsible for the sales tax. After all, they’re a marketplace facilitator. Sometimes the delivery charge is higher than the price of the food.
And the food might not even be taxable. Bloomberg points out that in Ohio, that Baconator is not subject to sales tax. A carbonated beverage is, though and so is a toy in a kids’ meal. DoorDash is not up to complicated decisions about sales tax for specific menu items.
Sometimes deliveries cross state lines, too, making things even more complicated. Though the online sale may be said to take place out of state in any case, since the transaction is not local for most consumers. Unless the fact that a local franchise collects the money makes it an in-state transaction… or Wendy’s website is itself a market facilitator.
Should DoorDash be involved?
DoorDash doesn’t collect sales taxes at all in some states. In those cases, the fast food restaurant is on the hook for sales taxes on the food. But who is responsible for collecting sales tax on the delivery fee? DoorDash and other similar companies say that they are marketplaces matching up buyers and sellers. Since they don’t actually sell anything, their thinking goes, they can’t be expected to collect or pay sales tax.
Wendy’s has a national online ordering system, plus an app. Consumers using different food delivery systems can expect to pay different prices. Depending where you live, you may have no choice. If you have a choice of services, one of the factors in pricing differences is that some food delivery services pay sales tax and some do not.
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