Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales and Use Tax Annotations


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T

550.0000 TAXABLE SALES OF FOOD PRODUCTS—Regulation 1603

Annotation 550.0870

(e) CATERERS

550.0870 Special Event Charges—Caterer. A caterer who designs, plans, and coordinates parties and special events that usually take place on a client's property asked the following questions: (The responses are based on the assumption that none of the nontaxable charges are mandatory services in order to obtain the meals).

(1) Does sales tax apply to marked up items such as decorating food buffet and entertainment sites, wait staff, site managers, and administrative personnel?

In general charges for items relating to the preparation, furnishing, and servicing of food must be included in the measure of sales tax. Charges not related to service of food, e.g., entertainment are nontaxable. The decoration of the food buffet is taxable. The decoration of entertainment sites is excludable from the measure of tax.

(2) Are the following administrative fees charged to clients subject to sales tax?

(a) Phone

(b) Freight

(c) Travel

(d) Postage

(e) Insurance

(f) Accommodations (for entertainers, staff)

(g) Temporary office equipment rental

These charges are taxable when related to sales of tangible personal property (meals). For example, charges for accommodations for staff who will serve meals are taxable.

(3) Are rental of costumes for entertainers taxable?

If this is a charge which is passed on to the client, it is not taxable. However, the costume supplier's charge to the caterer may be taxable as explained in Regulation 1660.

(4) Are prop rentals for decor taxable? These props are sometimes custom-built by the caterer and rented to client. They are returned and used again. Other times, props are rented from outside sources.

When props are related to service of food, i.e., table decor, the caterer is regarded as the consumer and may not purchase or rent the property ex-tax for resale. The caterer is the consumer and the charge to the client is part of taxable gross receipts.

Since these transactions occur on the premises of the client, the transfer of possession and control of items unrelated to food service are regarded as rentals. With respect to props which the caterer designs and builds, they are not rented in substantially the same form as acquired and the rental charges are taxable. When rental props are from an outside source, the caterer is subleasing to its client and rental is not subject to tax if tax has been paid to the prime lessor. However, the caterer may choose to issue a resale certificate to its lessor and pay tax on its rental charge to the client as explained in Regulation 1660.

(5) Is a charge for a one time liability insurance for a specific event which is marked up when billed to client taxable?

Since it is related to taxable sales (meals, etc.), the charge is taxable as a part of caterer's overhead cost of selling those items.

(6) Is a professional fee for designing and coordinating an event, for which the client is billed separately for materials, subject to tax?

If the fee is in connection with the sale of tangible personal property, it is taxable.

(7) Is providing consulting service to a client regarding a party or event subject to tax?

If the consulting is unrelated to any sale of tangible personal property, the charge is nontaxable.

(8) Is providing an entertainment production package which includes: entertainment, costumes, staging, sound system, lighting, seating, etc., subject to tax?

Charges for optional entertainment are not taxable. Assuming that the lighting and seating are not the same as used in connection with serving of meals, these charges also are nontaxable.

(9) Is valet parking taxable?

Valet parking is not taxable. 11/6/90; 12/12/90. (Am. 2000–1).