Article by David Joseph, co-founder, DAVO by Avalara
Food delivery apps offer opportunities to expand your business through new customers and increased sales. For many restaurant owners, the additional revenue can help fuel growth and expansion.
However, without the right set-up and management, these apps can cause more pain than profit. Get the most out of your food delivery partnerships by following these best practices for managing food delivery apps inside your POS.
The Restaurant or the Delivery App?: Learn Who is Responsible for Collecting and Remitting Sales Tax
One of the most important aspects of integrating a food delivery app into your POS is the sales tax set-up. In some cases, the delivery company is responsible for collecting sales tax on the order, reporting it and then paying it to the state when it’s due. If this is the case for one of your partners, you do not want to erroneously report on and pay sales tax on that same order.
On the flip side, if the restaurant is responsible for reporting, collecting and paying sales tax on delivery app orders, you want to ensure the POS is configured properly. The penalties for underreporting sales tax can be steep. And mistakes can trigger sales tax audits, which can be a real hassle for any business owner.
Review your agreement with each food delivery service to see exactly who is responsible for filing and remitting sales tax. You can also review the DAVO Sales Tax state-by-state chart for some of the major, national delivery apps to see which party is liable.
Add Delivery Orders to Your POS
Your POS system should be the official record of all sales for your restaurant. Orders including dine-in, takeout and food delivery should all flow through your POS. To ensure you’re accurately recording the revenue, sales tax, delivery charges and other fees with food delivery app orders, you’ll need to enter each order as it comes in.
When each food delivery order is entered into the POS, orders flow into the kitchen more efficiently and you’ll spend less time reconciling POS, delivery service revenue, and bank records. Consult your POS partner or read our guide to setting up 3rd party delivery app sales.
Common Mistakes
When a restaurant is liable for paying sales tax, many restaurant owners don’t realize that they must pay sales tax on the entire amount of sales tax collected on the order – regardless of the delivery service fee. In other words, the restaurant is responsible for sales tax on the total sale, not the net amount from the food delivery service.
When the food delivery service is responsible for paying sales tax, some business owners may find they’ve been double paying. Consult your financial advisor or State Department of Revenue on how to file an amended return and potentially get a refund. In the meantime, make sure your POS is configured for this scenario.
Add Sales Tax Automation to Your Tech Stack
Food delivery apps can be a great source of additional revenue. Make sure you’re managing sales tax correctly and efficiently. Don’t lose any more valuable profits to inefficiency or costly mistakes.
DAVO Sales Tax integrates directly with the most popular POS systems in just a few minutes. From there, the app calculates sales tax daily, puts the money aside and the files and pays on time when sales tax is due. Automating sales tax takes just a few minutes to set-up and then you never have to worry about sales tax again. Give it a try today. Your first monthly filing is free. Put your sales tax on autopilot and stop worrying about how it will get paid.
As a former restaurant owner, David Joseph is no stranger to the struggles of restaurant sales tax. A self-proclaimed sales tax evangelist, David co-founded DAVO by Avalara, a sales tax automation platform that integrates directly with the point of sale.
