Texas restaurant operators may soon see meaningful tax savings following a recent executive order issued by the state comptroller that changes the sales tax treatment of certain third-party delivery fees. 

What’s Changing?

The order addresses a longstanding issue affecting restaurants that use delivery services such as DoorDash, Uber Eats and Grubhub. Under the state's previous interpretation, fees paid to these platforms were often treated as taxable data processing services, creating additional sales tax obligations for restaurants. The comptroller has now determined that these fees should instead be treated as commissions, which are generally not subject to Texas sales tax.

For restaurant operators facing rising labor, food and operating costs, the change could provide a welcome reduction in expenses. By eliminating sales tax on qualifying third-party delivery and ordering platform fees, restaurants subject to the 8.25% sales tax rate may realize savings equal to approximately 6.6% of those fees. Depending on the volume of delivery orders processed, annual savings could range from a few thousand dollars for some independent operators to tens of thousands for larger multi-unit franchise organizations.

What’s Next?

While the policy change has been announced, restaurants will need to wait for the formal rulemaking process to be completed before the savings take effect. A draft rule is expected in the coming weeks, and if the timeline remains on track, the change could become effective as early as December, at which point restaurants should no longer be subject to sales tax on qualifying third-party delivery and ordering platform fees. 

Here to Help

Look to our Texas restaurant tax pros to monitor developments closely and position your organization to take full advantage of this tax relief once it takes effect.