Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
550.0000 TAXABLE SALES OF FOOD PRODUCTS—Regulation 1603
550.0841 Independent Contractor. A taxpayer enters into agreements to prepare and serve food for various wineries under three scenarios.
Scenario 1. The taxpayer charges for his services by the day. The meals are served either in a banquet room, at an owner's house, or on a passenger train. The taxpayer decides what he will serve and performs all the cooking and serving in addition to the set up and cleaning for the meal. In addition, the taxpayer educates the winery's guests by allowing them to observe him prepare the food in the kitchen while explaining its preparation.
Where a person who hires a caterer does not withhold and pay federal and state income tax and social security tax with respect to the amounts paid to the caterer, the caterer is an independent contractor, not an employee. Since the persons hiring the taxpayer do not treat him as an employee by withholding income and social security taxes, the taxpayer is a caterer as defined in Regulation 1603(h). Hence, sales tax applies to all of the charges made by the taxpayer in connection with his service of the meals.
Scenario 2. The differences between this scenario and the first one are that there is a limitation placed on the amount of cost per person and the guests pay for the meal and not the winery. If the caterer is paid by the winery, the caterer would make a sale to the winery for resale to the winery's customers. If so, the winery owes sales tax on its sales to the customers. On the other hand, if the caterer sells the meals and collects payment directly from the customers of the winery, then the caterer makes taxable retail sales to the winery's customers.
Scenario 3. The taxpayer works for five rail cars located in California, Oregon, Missouri, and Washington. The taxpayer either starts in California and stays in California, starts in California and leaves the state, starts out of state and ends in California, or starts out of state and stays out of state. Wineries fly him to his starting destinations. When the taxpayer is traveling on a California/out-of-state train, the meals are served both in California and out of state. The taxpayer cooks breakfast, lunch, and dinner. He makes beds and does some general maintenance and cleaning. The taxpayer chooses what meals will be served with the wines provided by the winery. The taxpayer charges the winery $1,423.00 ($523 for food and supplies, and $900 for his catering labor). His charges for other services, such as cleaning, making beds, and maintenance, are stated separately from the catering charges.
The separately stated charges for cleaning, making beds, and maintenance are not related to the sales of meals and are not taxable. Charges for catering, food, and supplies are retail sales. An allocation should be made for sales without the state which are not subject to tax. 8/31/95.