UberEats, DoorDash: Which Marketplace Facilitators are Responsible for Paying California Sales Tax?
There is a lot of confusion about what’s known as “marketplace facilitators” and who is responsible for paying sales tax to the California Department of Tax and Fee Administration (CDTFA). Marketplace facilitators are companies that connect buyers and sellers to facilitate the sale of goods and services. In this case, marketplace facilitators are companies such as UberEats, Instacart and DoorDash that connect restaurants with customers. Restaurants have to charge and pay sales tax. However, if they sell to a marketplace facilitator, that company is responsible for the sales tax. And the business is not responsible for collecting or paying the sales tax.
Where this becomes confusing, however, is that while those companies are considered marketplace facilitators, they may not be classified that way with the state of California. And as such, they are not responsible for collecting and paying taxes.
Here is some background: The Marketplace Facilitator Act (Assembly Bill 147 and amended by Senate Bill 92) and AB 1402 states that beginning October 1, 2019, a marketplace facilitator is generally responsible for collecting, reporting and paying the tax on retail sales made through their marketplace for delivery to California customers. Additionally, starting January 1, 2022, a marketplace facilitator may be required to collect, report and pay applicable fees on retail sales of certain items. A marketplace includes a physical or online place where marketplace sellers sell or offer for sale tangible merchandise for delivery in California. A marketplace facilitator is generally the operator of the marketplace.
Here’s an example of how this works. UberEats became a marketplace facilitator in California on April 1, 2021. As a marketplace facilitator, UberEats is responsible for collecting and remitting the sales tax collected. Therefore, the taxpayer’s UberEats sales made on or after April 1, 2021 are qualified as exempt marketplace facilitated sales.
DoorDash and Instacart are considered marketplace facilitators. However, they are not classified as facilitators yet in California and with the CDTFA. This means that restaurants who contract with DoorDash, for example, are responsible for collecting and remitting the sales taxes on sales they make through DoorDash. Many restaurants may not be aware of this nuance in the law, which is why it’s important to understand if they are contracting with marketplace facilitators that are
If you’re a California restaurant contracting with marketplace facilitators, it’s important to know which facilitators are registered with the state of California because that directly impacts who is responsible for sales tax to the CDTFA. It can be confusing when UberEats is responsible for sales tax collection and reporting, yet DoorDash is not. Always work with an experienced San Francisco tax attorney or professional to help you understand these nuances and what’s best for your business.
Allison Soares is a partner and tax attorney at Vanst Law LLP. It doesn’t matter the issue: audits, collections, appeals, international disclosures, grumpy people— Allison enjoys fixing problems. In addition to her legal work, she has worked in accounting and utilizes that knowledge to her advantage while handling cases involving EDD audits from San Francisco to San Diego.
