The service provided by third-party delivery providers can be easily overlooked from a Florida sales tax perspective for one good reason: it’s a service! Most services in Florida are not subject to tax, although Florida does tax a seemingly random selection of them (for example, investigative and crime protection services, interior nonresidential cleaning services, or nonresidential pest control services).
However, when it comes to delivery services, it is important to remember that they are often sold in conjunction with tangible personal property. After all, something must be delivered, otherwise the service has no value. When using third-party delivery services, the thing and the delivery are typically purchased at the same time. This is different from, say, purchasing and taking possession of a vehicle and then subsequently having that vehicle shipped out of state. In fact, third-party delivery services often use apps that make the purchase of tangible personal property and delivery of the item(s) seamless.
Blurring the lines between these separate transactions can have sales tax consequences in Florida. While the general rule in Florida is that delivery charges are exempt, the exemption has two conditions. First, the charge for delivery must be separately stated from the price of the delivered item. Second, the delivery charge must be optional. See TAA 14A-025.
While most delivery services separately state the price of the delivered item, third-party delivery services do not make their sole service optional. Keep in mind that although an individual may, for example, drive to Costco and purchase paper towels directly from the store, that paper towels sans delivery cannot be purchased directly from Instacart. Therefore, delivery charges on purchases made through third-party delivery services are mandatory and so taxable.
Identifying the taxability of delivery is unfortunately only the first step. The next task is understanding who is liable for the tax. Is the retailer of the tangible personal property, the delivery provider, or the customer? Further complicating it – which taxes are which party responsible for? The Department’s TIP 23A01-24 explains that these companies operate under various business models resulting in a shifting of tax liability depending on factors that an end consumer may not be aware of.
Although Florida’s marketplace facilitator statute went into effect July 1, 2021, delivery network companies were specifically excluded from the definition. However, some delivery network companies wanted to streamline sales tax collection and remittance by taking on the responsibility themselves. It wasn’t until over two years after Florida’s marketplace facilitator statute went into effect, on October 1, 2023, that Uber Eats began collecting and remitting sales tax (but NOT other taxes and fees, such as local meals and beverage taxes) on behalf of Florida restaurants. See more on Uber Eats’ sales tax policy HERE and Florida’s marketplace facilitator law HERE.
As confusing as it is to understand the sales tax treatment of delivery services in Florida, it only gets worse when delivery charges are evaluated on a national level. Whether delivery services are taxable or exempt from sales tax will vary from state to state, but some important questions to ask in identifying the correct answer are (1) whether the delivery is of a taxable or exempt item; (2) where the delivered item originates and ends (sourcing); (3) whether “shipping & handling” includes taxable or nontaxable or exempt items; and (4) how the delivery is invoiced. The taxability of delivery services can be tricky to understand, but is vital to know as the industry grows.
