May 02, 2016
From KPMG TaxWatch
The Georgia Department of Revenue recently addressed whether an online marketplace for chefs had to collect and remit sales tax. The taxpayer at issue hosted a website that facilitated matching customers with private chefs. The chefs were independent contractors, not employees of the taxpayer. In a typical transaction, the customer selected a date, chef, and meal from the options listed on the website. Once the chef agreed to the requested meal, the customer paid the taxpayer. The taxpayer retained a service fee and transmitted the remaining funds to the selected chef, who then prepared the requested meal for the customer at the specified time and place. The service fee covered the taxpayer’s services of hosting the website, marketing the service, payment processing, and responding to client requests and disputes. The taxpayer was not licensed to sell food and did not hold a food service permit.
The taxpayer asserted that it was not engaged in the retail sale of meals, but was providing a nontaxable service. The Department disagreed. Under Georgia law, “dealers” making sales of tangible personal property (including food) at retail must collect and remit sales and use tax. Although entities selling food at retail are typically subject to certain licensing requirements, the Department concluded that even if the taxpayer was not required to obtain a license, it was nevertheless a dealer engaged in retail sales of meals. The taxpayer’s transactions, the Department noted, were “virtually the same” as a restaurant or catering business. Although in taxpayer’s case the meals were prepared by a chef and served at the customer’s home or other venue, ultimately the taxpayer was offering and providing a prepared meal to the customer similar to a restaurant. The Department concluded that the taxpayer was required collect and remit sales tax on amounts received from customers without a deduction for its service fees. For more information regarding this letter ruling, please contact Ben Cella at 404-979-2012.
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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.