United States

Wisconsin: Charges for Premium Content on Restaurant Mobile Point of Sale Device Subject to Sales Tax

Aug 08, 2016
From KPMG TaxWatch

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Recently, the Wisconsin Department of Revenue addressed the taxability of mobile point of sale devices used by a casual dining restaurant. The restaurant, one of the largest casual dining companies in the country, added mobile point of sale devices to each table, at certain of its locations. The device, a tablet with a touch screen interface, offered pictures and detailed descriptions of menu items. Restaurant patrons could place drink, appetizer, and entree orders, and pay their checks directly through the device. For an additional fee, customers could also access premium content on the device, such as games, news, sports, access to social media, and the ability to select songs to be played. The premium content fee was included as a line item on the customer's restaurant bill.

The vendor of the mobile point of sale devices charged the restaurant a monthly service fee for the use of the devices. Additionally, the vendor might also charge the restaurant monthly commissions as a percentage of the premium content fees. In a possible alternative scenario, the vendor would not charge a monthly service fee, but would receive all the premium content fees up to a maximum amount.

The restaurant requested guidance on the taxability of the premium content fees charged to customers, as well as the monthly fees paid to the vendor for the use of the devices and the premium-content-based commissions. Turning first to the charges for accessing premium content, the Department ruled that these charges were “taxable admissions” charges, which in Wisconsin includes fees paid for the privilege of having use of amusement, entertainment, athletic or recreational devices. Next the Department determined that the monthly fees charged by the vendor for the restaurant’s use of the devices were subject to tax, “as the sale, license, lease or rental of tangible personal property.” Because the restaurant used the devices it its business, it could not furnish the vendor with a resale certificate. The Department similarly concluded that any commissions paid to the vendor based on the amount of premium content sold to customers were also subject to sales and use tax, as they were part of the price to lease the devices. For more information on this private letter ruling, please contact Jill Nielsen at 312-665-2794.

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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.