Industry Topics for Caterers

Sales and Use Taxes in General

In California, all sales are taxable unless the law provides a specific exemption. In most cases, taxable sales are of tangible personal property, which the law defines as an item that can be seen, weighed, measured, felt, or touched.

Generally, you are considered to be a caterer if you serve meals, food, or drinks on premises supplied by your customer.

For the catering industry, most taxable sales are going to be 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 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 when 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

Beginning January 1, 2014, it will be 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 Drinks

As a caterer, charges you make to your customers for the preparation and serving of food and drinks are taxable.

For more information, see publication 22, Dining and Beverage Industry.

Tables, Tableware, and Linens

Tableware means items like dishes, utensils, glasses, and pitchers that are used for serving and eating meals at a table. Similarly, tables and linens (tablecloth) are used to serve meals to your customers.

If you include charges for tableware in a single price for preparing and serving meals, the entire charge is taxable.

You may not use a resale certificate to purchase or rent non-disposable tableware, tables, or linens when you charge a single price to your customer.

If you separately itemize charges for the rental of tableware, tables, or linens, you are considered to be leasing the property to the customer. If you paid tax when you purchased the items, the rental is not taxable. If you did not pay tax when the items were purchased, your rental charge is taxable.

Disposable Tableware

Disposable tableware, such as plastic utensils and paper plates, may be purchased without payment of tax if you issue a resale certificate to your supplier.

Any charges you make to your customers for disposable tableware are taxable, whether or not your billings are itemized.

For more information, see publication 22, Dining and Beverage Industry.

Labor and Food Preparation Charges

As a caterer, charges that you make to your customers for the preparation and serving of food and drinks are taxable. Tax applies even if you do not provide the food or drinks, or if the preparation or service is performed by an employee or subcontractor.

For more information, see publication 22, Dining and Beverage Industry.

Charges for Serving Customer-Furnished Food and Beverages

As a caterer, any charges you make to your customers for preparing or serving food or beverages they provide are taxable. For example, tax applies to any charges you make for cutting and serving a wedding cake or opening and serving customer-furnished wine.

For more information, see publication 22, Dining and Beverage Industry.

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 you make to your customers for the use of the items are taxable.

For more information, see publication 46, Leasing Tangible Personal 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, Dining and Beverage Industry.

Coordinator Fees

As a caterer, charges you make to your customers for the planning and coordination of events are taxable if they are related to the sale of tangible personal property. For example, if the purpose of planning a reception is the preparation and service of food and beverages, charges you make to your customers for coordinating the reception are taxable.

For more information, see publication 22, Dining and Beverage Industry.

Sales for Resale

Tax does not apply to charges you make to prepare food or drinks 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 drinks, charges you make to your customers for parking attendants, security guards, and entertainment are not subject to tax.

For more information, see publication 22, Dining and Beverage Industry.

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 school are taxable, whether you are hired by a school, school district, or student organization. Such sales are generally taxable whether you are paid by the school or by students or parents.

Charges you make for preparation and service of meals to students at school 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 between you or your employees from other employees of the school.

For more information, see publication 22, Dining and Beverage Industry.