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Taxable Meal Facilitators

Meal Delivery Platforms

A company that facilitates sales of meals or alcoholic beverages through an online platform, and collects payment from the customer, is considered an “operator” by Vermont law. Operators have legal responsibilities for collecting meals and alcohol tax and remitting it to the Vermont Department of Taxes. These companies are also referred to as “taxable meal facilitators.”

A taxable meal facilitator must register for a meals and rooms tax account with the Department of Taxes. This is required even if the company orders from a restaurant and does not prepare the meals itself. Registering for an account is simple.

Register for a Business Tax Account

Taxability of Sales

A taxable meal facilitator must collect meals and alcohol tax on all charges for a taxable meal or alcoholic beverage, including any additional delivery or facilitation charge that it retains. It may purchase meals for resale from a restaurant by using a fully executed exemption certificate. One certificate may be kept on file at a restaurant to be used to cover all transactions from a single platform. A restaurant is not required to collect an exemption certificate for every transaction.

The taxable meal facilitator is responsible for collecting, reporting, and remitting the tax to Vermont.

Responsibilities of the Restaurant

Restaurants that sell to taxable meal facilitators for delivery and resale to a customer are required to retain the fully executed exemption certificate for a period of at least three years. Exempt meal sales, along with taxable sales, must be reported to the Department of Taxes on the Meals and Rooms Tax return.

A restaurant must collect and remit meals and alcohol tax if a platform operator does not provide a fully executed exemption certificate.

Example

A customer orders a pizza for a price of $20. The Company arranges for the preparation of the pizza from a local restaurant, pays the restaurant $12 for the pizza, and delivers the pizza to the customer. The company retains the remaining amount as its facilitation fee and for the cost of delivery.

The company may purchase the pizza without paying meals tax to the restaurant as a purchase for resale if it executes exemption certificate Form M-3 and files it with the restaurant. The customer is charged $21.80 ($20 plus 9% meals tax). The facilitator, not the restaurant, must report and remit the tax.

Responsibilities of the Driver who Delivers the Meals

Drivers who pick up the food from the restaurant and deliver it to the consumer are not Taxable Meal Facilitators.

Financial transactions occur on the Taxable Meal Facilitator’s online platform, and drivers do not handle money except for voluntary cash tips given at the time of delivery by the consumer to the driver. A driver is not expected to register for a meals and rooms tax account with the Department of Taxes.

It is expected that the Taxable Meal Facilitator will provide the restaurant or food preparer with a fully executed exemption certificate. A driver should not be expected to supply the food preparer with an exemption certificate.

Web-Based Guides and Recommendations

A company that provides menus, recommendations, and links to a restaurant’s website is not responsible for tax as long as it does not collect any charges for taxable meals or alcoholic beverages.

Tips

A tip is not taxable if it is a sum of money gratuitously and voluntarily left by a customer for service but only if it is received by a service employee and not retained by the operator.

Local Option Tax

All taxable meal facilitators in Vermont must collect a 1% local option meals tax for meals and alcoholic beverages sold in the municipalities that levy this tax. Find out which municipalities levy Local Option Tax or lookup towns by zip code.

Taxability is based on where the meal or alcoholic beverage is delivered (not the location of a company’s office or the location where the food is prepared). Orders delivered in municipalities where local option tax is imposed are subject to the tax. Similarly, meals from a restaurant located in a municipality that does not impose the tax are subject to the local option tax when delivered to municipalities subject to the tax.

Orders that are picked up by the final customer are subject to local option tax if the pick-up location is in a municipality with a local option tax.