Tax Guide for Caterers
Industry Topics
Sales and Use Taxes in General
In California, all sales of tangible personal property are taxable unless the law provides a specific exemption or exclusion. Tangible personal property is defined in the law as an item that can be seen, weighed, measured, felt, or touched.
Generally, we consider you to be a caterer if you serve meals, food, or beverages on premises supplied by your customer.
For the catering industry, most taxable sales are going to consist of food and beverages. However, you may also be required to collect sales tax on mandatory tips, corkage fees, and charges for tables and tableware, among other things.
Use tax is a companion to California's sales tax, and generally it is due whenever you purchase taxable items without payment of California sales tax from an out-of-state vendor for use in California. You also owe use tax on items that you remove from your inventory and use in California if you did not pay tax when you purchased the items. To pay use tax, report the purchase price of the taxable items under “Purchases Subject to Use Tax” on your sales and use tax return. Those purchases become part of the total amount that is subject to tax.
If you consume or give away taxable non-food items such as soda or alcoholic beverages that you purchased without paying sales tax, you owe an equivalent use tax—usually equal to the sales tax—based on the cost of those items to you.
For more information, see publication 22, Dining and Beverage Industry.
Sales Suppression Software Programs and Devices
It is a crime for anyone to knowingly, sell, purchase, install, transfer, or possess software programs or devices that are used to hide or remove sales and to falsify records.
Using these devices gives an unfair competitive advantage over business owners who comply with the law and pay their fair share of taxes and fees. Violators could face up to three years in county jail, fines of up to $10,000, and will be required to pay all illegally withheld taxes, including penalties and interest.
Food and Beverages
As a caterer, charges to your customers for the preparation and serving of food and beverages are taxable.
For more information, see publication 22.
Tableware, table linens, and tables
Tableware includes items such as dishes, utensils, cutlery, pitchers, and glassware that are used for serving and eating meals at a table. Similarly, chairs, tables, and table linens (such as tablecloths, napkins, and placemats) are used to serve meals to your customers.
Tax applies to your charges for the use of tableware, table linens, tables, and other items used as part of the serving of meals, food, or beverages. Therefore, the charges associated with those items are subject to tax, whether they are separately stated or a lump-sum amount (single price) with other catering charges.
When you cater an event and use those items to serve food or beverages at the event, you are not selling, renting, or leasing those items to your customers. Rather, you are using those items in furnishing and serving meals and you may not issue a resale certificate to purchase or rent tableware, table linens, tables, and other items used to serve food or beverages.
For more information on when tax applies to leases of tangible personal property, see Regulation 1660, Leases of Tangible Personal Property—in General, and publication 46, Leasing of Tangible Personal Property.
Rentals of Tableware Unrelated to Serving or Furnishing Food and Beverages
When you rent tableware to your customers and you are not using these items to serve food or beverages, you are considered the lessor of such items, and, accordingly, tax would apply in accordance with Regulation 1660.
Your lease of such items may be taxable. How tax applies depends on whether or not you paid tax at the time you purchased the item or placed the items into your rental inventory. No tax is due on your lease receipts if the items are leased in substantially the same form as you acquired them, and you paid tax, either to your vendor or by timely reporting and paying use tax measured by the purchase price of the property. If the items are leased in a form that is not substantially the same as when acquired or you did not pay tax on their purchase, tax will apply to the lease receipts.
For more information on when tax applies to leases of tangible personal property, see Regulation 1660 and publication 46.
Notes
Disposable Tableware
Disposable tableware, such as plastic utensils and paper plates, may be purchased without paying tax if you issue a resale certificate to your supplier.
Any charges to your customers for disposable tableware are taxable, whether or not your billings are itemized.
For more information, see publication 22.
Labor and Food Preparation Charges
As a caterer, charges to your customers for the preparation and serving of food and beverages are taxable. Tax applies even if you do not provide the food or beverages, or if the preparation or service is performed by an employee or subcontractor.
For more information, see publication 22.
Charges for Serving Customer-Furnished Food and Beverages
As a caterer, any charges to your customers for preparing or serving food or beverages they provide are taxable. For example, tax applies to any charges for cutting and serving a wedding cake or opening and serving customer-furnished wine.
For more information, see publication 22.
Dance Floors and Stage Equipment
Generally, if you paid sales or use tax on the purchase or rental of items unrelated to the service or preparation of meals—such as a dance floor, podium, or audio-video system—tax does not apply to the rental of such property to your customers. If you did not pay tax when you purchased or rented the items from your supplier, rental charges to your customers for the use of the items are taxable.
For more information, see publication 46.
Menus, Programs, and Other Miscellaneous Property
Charges you make to your customers for items such as printed programs and menus, floral arrangements, balloon displays, ice sculptures, and the like are generally subject to tax.
For more information, see publication 22.
Coordinator Fees
As a caterer, charges to your customers for the planning and coordination of events are taxable if they are related to the furnishing of meals, food, or drinks for the event. For example, if the purpose of planning a reception is the preparation and service of food and beverages, charges to your customers for coordinating the reception are taxable.
For more information, see publication 22.
Sales for Resale
Tax does not apply to charges to prepare food or beverages for a buyer who will in turn sell them at retail and report tax on their sale.
In such cases, the buyer should provide you a valid resale certificate at the time of sale.
For more information, see publication 103, Sales for Resale.
Parking Attendants, Security, and Entertainment
Provided that they are not participating in the preparation or service of food or beverages, separately stated charges to your customers for parking attendants, security guards, and entertainment are not subject to tax.
For more information, see publication 22.
Sales to the United States Government
Sales to the U.S. government are exempt from tax. If you make such sales, you must keep purchase orders showing the sales were made directly to the U.S. government.
If the purchase is paid by credit card, you must keep copies of the sales invoice and the credit card receipt. To qualify for the exemption, the credit card must belong to the U.S. government.
For more information, see publication 102, Sales to the United States Government.
Meals Served at a School
Generally, your sales of meals and other food products to students in schools are taxable, whether you are hired by a school, school district, or student organization. Such sales are generally taxable when you are paid by the students or parents.
Charges for the preparation and service of meals to students at schools are not taxable if your contracts and records show that:
- The facilities you use to serve meals to the students are routinely used by the school for other purposes, such as sporting events and other school activities,
- The fixtures and equipment you use to prepare and serve the meals are owned and maintained by the school, and
- The students purchasing the meals cannot distinguish you or your employees from other employees of the school.
For more information, see publication 22.