Delivery network companies must collect Ohio sales tax (or not)

Ohio’s new law (House Bill 315) essentially makes the delivery network company a marketplace facilitator responsible for collecting and remitting the applicable sales tax. However, the delivery network company may apply to the Ohio Department of Taxation for a waiver from the sales tax collection obligation. More on that in a bit.

Definitions of terms

A “delivery network company” is “a person that operates a business platform, including a website or mobile application, to facilitate delivery network services.”

A “delivery network courier” is “an individual connected to a consumer through a delivery network company and who provides delivery network services to that consumer.” (Basically, it’s the person who knocks on your door and hands you your takeout.)

A “local merchant” is “a person engaged in selling local products from a temporary or fixed place of business in this state, including a kitchen, restaurant, grocery store, retail store, or convenience store.”

A “local product” is “any tangible personal property, including food, but excluding freight, mail, or a package” with postage.

When performed as part of a single transaction, “delivery network services” means both:

• Pickup of a local product by a delivery network courier from a local merchant that’s not under common ownership or control of the delivery network company
  • This may include selection, collection, and purchase of the local product, as often happens with groceries
• Delivery by the delivery network courier of that local product to a location designated by the consumer that’s not more than 75 miles from the local merchant’s place of business where the pickup occurs

Although HB 315 makes delivery network companies generally responsible for collecting and remitting the applicable sales tax, it also allows them to opt out of that requirement. 

A delivery network company may request a waiver from the requirement to collect sales tax, provided it:

• Is current on all charges, fees, and taxes administered by the Ohio Department of Taxation;
• Has not requested that a previously granted waiver be canceled (or had a previously granted waiver be revoked by the commissioner) within the 12 months preceding the request for a waiver; and
• Has not violated Section 5739.30(B) of the revised code (i.e., the company must have a history of filing tax returns on time).

If the tax commissioner grants the delivery network company a waiver, the company must notify each local merchant operating on the network’s physical or electronic marketplace that each local merchant is now considered the vendor responsible for collecting and remitting the applicable sales taxes.

For the most part, Ohio law allows the sales and use tax due on delivery charges to be apportioned so that charges to deliver taxable goods (like alcoholic beverages and soft drinks) are taxable but charges to deliver nontaxable items (like food to be consumed off premises) are tax free.

HB 315 changes how Ohio sales tax applies to delivery charges by a delivery network company that received a waiver and therefore isn’t responsible for collecting and remitting sales tax on the goods sold: All delivery charges imposed by the delivery network company in this scenario are taxable, including charges to deliver nontaxable items.

This adds a layer of complexity to a law designed to simplify sales and use tax compliance.

In summary:

• Ohio considers delivery network companies to be marketplace facilitators.
• Delivery network companies are responsible for collecting and remitting the tax due on facilitated sales (e.g., DoorDash orders).
  • Local merchants generally are not responsible for collecting and remitting the tax due on orders made through a delivery service company.
• Delivery network companies may opt out of the requirement to collect and remit sales tax on their delivery orders; if they do, they must obtain a waiver from the Ohio Department of Taxation and give a copy of the waiver to each affected local merchant.
  • Local merchants are responsible for collecting and remitting sales tax on orders made through a delivery network company that has given them a waiver.
  • The delivery network company remains liable for sales tax on the delivery charges.

HB 315 will take effect 91 days after being filed with the Secretary of State.

Increasingly, yes. “State laws never anticipated the breadth and variety of the marketplace facilitator business model,” explains Scott Peterson, VP of Government Relations at Avalara. “States never intended to impose sales tax on two different entities for a single transaction and are now walking back where those laws create double taxation.”

That said, not all states are coming up with the same solutions. 

For example, California doesn’t require third-party delivery service providers to collect and remit taxes on meals sold through their platforms, but it allows them to elect to charge the tax. Pennsylvania does require delivery businesses to collect sales tax on customers’ orders. 

A bill making its way through the Michigan Legislature would allow marketplace sellers to collect and remit applicable Michigan sales tax for qualified delivery network sales. In other words, it would enable local merchants to opt out of having the marketplace facilitator collect and remit sales tax on their behalf.

While Michigan and Ohio could end up in a similar place — local businesses would collect the tax in some cases and delivery companies would collect the tax in others — the path there would be different. Ohio’s new law gives the delivery network company the power to opt out of the collection requirement. The proposed law in Michigan would give that power to the local merchants.

And it’s often the local merchants, restaurants that make both dine-in and delivery sales, that struggle most with sales tax compliance in these scenarios.

The National Conference of State Legislatures has policy recommendations to reduce the likelihood of double taxation, and the Streamlined Sales and Use Tax Governing Board is working to understand where and why double taxation arises. You can read more about their efforts in the retail section of our annual report, Avalara Tax Changes 2025. 

DAVO by Avalara helps restaurants nationwide collect, file, and pay sales tax. Learn how DAVO by Avalara streamlines sales tax compliance for the restaurant industry.