Third-party delivery services such as DoorDash, Uber Eats, and Grubhub have become a staple in restaurant operations. While these platforms streamline ordering, fulfillment, and reporting, they also introduce a less obvious risk, one that can directly impact a restaurant’s bottom line if left unaddressed.
Don’t Inadvertently Accrue, Remit Sales Tax
In many states, these delivery providers are classified as marketplace facilitators and are responsible for collecting and remitting sales tax on behalf of the restaurant. In essence, the delivery provider becomes the seller of record for sales tax purposes. However, the reconciliation reports they provide often include sales tax amounts that are then fed into a restaurant’s point of sale and general ledger systems. Depending on the individual restaurant’s accounting setup, third-party delivery sales may be included in the monthly gross sales, and the tax could be included in sales reports even if it does not ultimately reach the general ledger. Without proper review, this can result in restaurants inadvertently accruing and remitting sales tax that has already been handled by the delivery service. The result is a common but costly issue: double reporting of sales tax during the monthly compliance process.
When To Submit A Refund Claim
Fortunately, if a restaurant discovers an overcollection and remittance of sales tax, refund claims can be filed to remedy the error. Depending on the state, taxpayers may be able to file refund claims for up to four years. The refund process in many states may be quite daunting, as states may require detailed transactions and proof that the original third-party delivery sales were included on the restaurant’s return. This is especially evident if the refund claimed involves a significant amount of tax dollars. Additionally, there are particular nuances in some states regarding the required formatting and submission of the claim (amended returns, transaction details, affidavits, etc.). However, if the restaurant can sufficiently prove to the state that the tax was erroneously remitted, it would be entitled to a refund with interest, where applicable. Before filing a refund claim, a restaurant operator should evaluate its records and ability to demonstrate to the respective departments of revenue that the sales tax was remitted in error.
Know Your State’s Sales Tax Rules
It is important to note that third-party delivery services are not required to collect and remit sales tax in all states. In these situations, the tax may be collected by the delivery service and remitted to the restaurant for ultimate remittance to the state (or the tax may not even be collected at all). Before entering into an agreement with a delivery service, restaurants should understand their sales tax collection and remittance obligations regarding these transactions. In addition to sales tax, restaurants should also understand their responsibilities as it relates to local food and beverage taxes or other tax options. It can be an easy trap to assume that the delivery service is handling all transaction taxes when it is only responsible for sales tax in certain jurisdictions.
Restaurants that rely on third-party delivery services should take a proactive approach to their sales tax processes. A detailed review of monthly reconciliation procedures, specifically how delivery sales and related tax amounts are captured, reported, and excluded where appropriate, is critical to avoiding costly errors. Establishing clear internal controls or working with a tax professional to validate compliance across jurisdictions can help ensure taxes are not being overreported or remitted in error. Without these safeguards in place, restaurants risk continuing to leave money on the table, money that could otherwise be recovered and reinvested in the business.
Work With A State & Local Tax Professional
If you have state and local tax questions or are wondering whether you are entitled to file a refund claim, contact the state and local tax professionals at GBQ for assistance. Our team works closely with restaurant owners and operators and can reveal cost-saving opportunities while maintaining compliance with federal, state, and local tax rules and regulations.
For additional insight for restaurant owners, check out these resources:
Strategic Price Increases: How Smart Businesses Protect Profits While Keeping Customers Loyal
When Debt Goes Away: Understanding Debt Extinguishment Under GAAP
Restaurant Valuations In 2026: What’s Driving Multiples Now
