Did you know the sales taxes you charge have a new requirement?
If your restaurant or food service business partners with Uber Eats, as of July 1 of this year, there’s a big change regarding sales tax.
In Pennsylvania (and many other states), Uber Eats is now required to calculate and collect sales tax on all orders placed via the tool. The third-party facilitator is also required to remit the sales tax to the state.
Previously, online businesses had the option of charging sales tax OR notifying Pennsylvania customers that they might owe a Pennsylvania tax with purchase.
If the business had offices outside of Pennsylvania, it could elect not to collect or report the sales tax, leaving the onus on the customer and/or other in-state vendors with which it partnered.
For restaurants and food service businesses partnering with Uber Eats, the business likely charged and collected sales tax and then remitted it to the state, rather than relying on Uber Eats to do so.
But those options are no more. As part of the Sales and Use Tax Bulletin 2019-01, businesses with gross sales of more than $100,000 (such as Uber Eats), identified as “Marketplace Facilitators”, must now register, collect, and remit Pennsylvania sales tax.
This is also true for nearby states Virginia and West Virginia and will shortly be enacted (as legislation has already been passed) in New York and Maryland.
If a business has neither a physical nor economic (operating) presence in Pennsylvania, they are exempt from this rule.
How Does it Affect My Business?
If you own a restaurant or food service business and have partnered with Uber Eats, there will be some changes to how you collect sales tax on Uber Eats orders and how your tax returns are prepared.
Your business will need to be sure to not calculate and report the sales tax on customer orders made through Uber Eats as that tax will have already been collected and remitted by Uber Eats.
To ensure this, it’s best to work with whomever prepares your sales tax returns, separating out the sales tax already sent by Uber Eats to the state from the total sales tax your company owes each month.
You can find how much Uber Eats is collecting in sales tax via payment statements within Uber’s Restaurant Manager tool.
Uber Eats partners are not able to opt-out of the process of the marketplace facilitator collecting sales tax and remitting it to the state.
Why the Change
A growing trend within state regulations is to hold third-party companies, in this case known as “marketplace facilitators,” accountable for collecting sales tax, as they are the front line of collecting payment in this scenario.
A marketplace facilitator contracts with marketplace sellers to list or advertise items or services within a controlled marketplace, and either directly or indirectly collects payment from the purchaser, transmitting the funds to the marketplace seller.
So rather than a store, restaurant, or other originator collecting and remitting sales tax, the front-line facilitator of the customer interaction will do so.
If you’re not sure how this will shake out for your business, or you have related questions a seasoned accountant can answer, please don’t hesitate to get in touch with us today! We’re always available to schedule a consultation and lead you through regulatory changes such as the Uber Eats sales tax updates.