Since the start of e-commerce and web-based businesses, uncertainties have existed about how sales tax applies to their
I think a recent ruling from the New York Department of Taxation and Finance reaches a logical conclusion. TSB-A-14(27)S (8/20/14) involves a business (B) that operates a website where people can place an order with a restaurant and pay. B’s website lists about 5,000 restaurants in 27 cities. Website visitors search for a restaurant, see the menu, place an order and pay. B generates money by charging various services to the restaurants: one-time activation fee, menu update fee, and a
NY imposes sales tax on food and drink sold in or by restaurants and similar establishments if consumption is on the premises or where the vendor serves food off the premises.
The Commissioner ruled that B was not liable for sales tax as it did not operate a restaurant or provide catering services. B’s business is “Internet advertising services and fulfillment services to the restaurants.” The ruling notes that if B does not remit the sales tax it collects to the restaurant, “the Commissioner reserves the right to collect those funds from [B] under the doctrine of money had and received.” Finally, B’s services are not subject to sales tax.
Seems logical. Too bad the law wasn't crystal clear enough to avoid the time for the taxpayer and state of issuing the Advisory Opinion. It looks like there is no fee charged for obtaining one, but certainly, costs of the research and drafting by the taxpayer and their tax advisers and the state in issuing the ruling. [Click here for the form to request an opinion and here for the instructions if you want to see what is involved in getting an opinion.]
Blog post
Logical sales tax ruling on a web-based business
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