Tax Guide for Cooking Class Providers

Overview

The purpose of this guide is to explain how sales and use tax (tax) generally apply to a business that provides cooking instruction along with other items like food (meals) and beverages that will be consumed on the premises either during or after the instructional portion of the cooking class. Within this guide, the term “cooking instruction” refers to instructor-led sessions where participants may learn a variety of skills such as cooking, baking, pastry preparation, food safety, and food presentation. Some businesses that offer cooking classes operate in retail locations with professional kitchens, some offer in-home cooking instruction, and others offer online or virtual instruction. How tax applies to sales made by cooking class providers depends on the nature of the cooking instruction and the type of items sold.

Understanding how tax applies to your business is essential. We recognize that researching how tax applies in specific situations can be complicated and time-consuming. We've created this guide to assist you with understanding the tax laws relevant to your business.

General Information

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

When your business provides significant and distinct operations, such as educational training in addition to the sale of meals and beverages, the charge for the educational training is a nontaxable service charge that is separate from your taxable sales of meals and beverages. You may also be liable for tax on other charges, such as mandatory tips and corkage fees (see Other Sales and Tips, Gratuities, and Service Charges below). Sales of other types of items (such as, cookbooks ) are also generally subject to tax.

  1. See R&TC section 6016

How Tax Applies to Cooking Instruction

Nontaxable Cooking Instruction

When the intent of a cooking class, or series of classes, is to provide the service of culinary instruction, and any food received by the students is incidental to that instruction, you are considered the consumer of the food incidentally used in rendering your instructional services. In this situation, a lump-sum charge for the instruction and incidental food to your customers is generally considered a charge for a nontaxable service. Cooking classes where instruction is considered the intent of the transaction generally include classes where there is a significant amount of time providing instruction on preparing each dish, the class involves active student participation and is not limited to demonstration by the instructor, and a single amount (lump-sum) is charged to students attending the cooking class which includes the cost of both the educational instruction and the incidental food prepared during the class. For example:

  • You offer a cooking class for $100. During the class, the instructors demonstrate cooking skills and techniques, and the students actively participate in preparing and cooking each part of a multi-course meal, including chopping, mixing, cooking, and serving. At the end of the class, students eat the meal they prepared. In this example, the intent of the transaction is the cooking instruction, and you would be considered the consumer of the items used during the class.

You are considered the consumer of the food you purchase whether you perform your services in a retail location or in an at-home location, even if the students eat the food they prepare during class. Tax generally will not apply to your purchases of food ingredients as these are considered sales of food for human consumption.

Educational classes that provide instruction on how to make alcoholic beverages or dishes where alcohol is an ingredient are treated the same as other instructional courses. When the intent of attending your class is the classroom instruction, you are considered the consumer of the alcohol consumed during class, and tax applies to your purchase of this alcohol. However, retail sales of alcohol outside of the instructional setting are taxable. See Other Sales for more information.

If the price for the cooking instruction and food are stated separately, the separate price charged for the meal is subject to tax. The price charged for the cooking instruction is exempt from tax as an educational service.

Taxable Cooking Instruction

If you provide cooking classes with meals for students where the intent of attending the class is to receive the meal or you provide a cooking demonstration instead of a class with active student participation, your charges are taxable. This will include charges for both the instruction and meals. For example:

  • You offer a cooking class for $100 where the instructor provides a demonstration of preparing a meal. The students sit around a table and watch and listen to the instructor provide cooking tips and techniques while the instructor prepares the meal. At the end of the class the students eat the meal. You are considered the retailer of the meal and tax will generally apply to the entire selling price of the class.

Note: If you provide cooking instruction during regular business hours at a location that normally operates as a restaurant, it is presumed that the intent of attending the class is to receive the meal and your charges are generally taxable.

If you make regular sales of food, beverages, or other items that are subject to tax, you are required to register for a seller's permit and report and pay tax on your sales and use tax returns. See the Registration section for information on how to register.

For more information on how tax applies, see Tax Guide for Restaurant Owners.

  1. See Regulation 1501
  2. See Regulation 1602

How Tax Applies to Virtual and Online Cooking Classes

Virtual and online cooking classes are interactive cooking classes that take place over the internet. These classes typically use video conferencing technology to deliver instruction to customers. Some providers of this type of cooking class may allow customers to purchase pre-portioned kits of ingredients which will be shipped to them for use during the cooking class.

If you are a provider of online or virtual cooking classes who sells ingredient kits to customers, you are considered the retailer of the items sold. However, such sales are generally considered cold food sold to-go and are generally not taxable. The price charged to customers for cooking instruction is considered a separate service and is also generally not taxable.

If you make sales of products and services other than ingredient kits, those sales may be taxable. For more information, see the Other Sales section of this guide.

  1. See Regulation 1602 and Regulation 1603
  2. See Regulation section 1501

Other Sales

Providers of cooking classes occasionally offer products and services which are separate and distinct from the cooking instruction and food prepared during the instruction. Depending on the types of items or services you provide, your sales of other items or fees charged may also be taxable.

Below are several examples of items or fees you may charge that are generally taxable:

  • Pre-prepared foods
  • Alcohol
  • Carbonated beverages
  • Corkage fees
  • Cookbooks, appliances and other kitchen tools and gadgets
  • Other services sold with taxable items

If you sell taxable goods or services along with cooking instruction for a single price, you must establish a reasonable segregation between the charges. Generally, you may use the fair market value of the good or service to establish a price. The fair market value of the good or service is the price that it would be sold for in the normal course of business. The price that you establish for the good or service will be the amount subject to tax.

If you sell taxable goods or services along with cooking instruction for a separately stated price, the separately stated price listed for the item is subject to tax.

For more information, see publication 22, Dining and Beverage Industry, Regulation 1602, Food Products, Regulation 1603, Taxable Sales of Food Products, and the Tax Guide for Caterers.

If you have questions about how tax applies to a particular item you sell, feel free to contact us with your question. Our contact information can be found in the section If You Need Help (Contact Us) below.

To-Go Food Sales

Your business may also provide customers food on a to-go or takeout basis that is not part of your educational cooking classes. Your sales of hot food sold to-go are subject to tax. A food product is considered to be a hot food product if it is heated to a temperature above room temperature. Examples of heating a food product above room temperature include grilling a sandwich, dipping a sandwich in hot gravy, or using infrared lights, steam tables, or microwave ovens. Examples of hot prepared food products include hot sandwiches, pizza, barbecued chicken, soup, consommé, bouillon, steak, and so on. Food is considered “hot” even if it has cooled by the time of sale if it was intended to be sold as a hot food.

Sales of cold foods and hot bakery items are generally not taxable when sold to-go. However, if you meet the requirements of the 80-80 rule, meaning 80 percent of your sales are of food products and more than 80 percent of your food sales are taxable, tax will apply to all your cold food sales sold in a form suitable for consumption on your premises, unless you make an election to separately account for your cold food items sold to-go. Cold food sold to-go is not in a form suitable for consumption on your premises if the food requires further processing by the customer or is sold in a size not ordinarily consumed by one person, such as an uncooked pizza, a quart of ice cream, or whole pie. When sold to-go, these items would remain nontaxable, even if you did meet the 80-80 rule.

If you make sales of a combination package which includes both hot and cold food products for a single price, tax will apply even though the package includes a cold food product. If a single price for the combination of a hot and cold food item is listed on a menu, wall sign, or is otherwise advertised, a single price has been established.

  1. See Regulation 1603

Tips, Gratuities, and Service Charges

Payment of tips, gratuities, and service charges are not taxable if they are paid by customers on an optional basis and are retained by employees. Generally, these payments are optional if your customer adds the amount to the bill or leaves a separate amount in addition to the actual amount due for the cooking instruction or meals. However, you must include mandatory payments in your taxable gross receipts.

Mandatory tips or required service charges are taxable when they relate to a taxable sale. When a mandatory tip is applied to a single charge that is partially taxable, the portion of the tip attributable to taxable sales is subject to tax. The portion of the mandatory tip attributable to exempt services is exempt from tax.

We consider a tip mandatory when menus, brochures, advertisements, or other materials contain statements that notify customers that tips, gratuities, or service charges will or may be added to the bill. Examples of such statements include:

  • “An 18% gratuity (or service charge) will be added to parties of 8 or more.”
  • “Suggested gratuity 15%,” itemized on the invoice or bill presented to your customer.
  • “A 15% voluntary gratuity will be added for parties of 8 or more.”

For more information, see publication 115, Tips, Gratuities, and Service Charges and Regulation 1603, Taxable Sales of Food Products.

Deal-of-the-Day Instruments

Third-party, internet-based companies (such as, Groupon, LivingSocial, and others) offer Deal-of-the-Day Instruments (DDIs) for sale on their website. DDIs with certain specific terms and conditions are considered retailer coupons and you, the retailer, are considered the issuer of the DDI. The sale of a DDI to a customer is not subject to tax.

When your customer redeems a DDI, you must include the amount your customer paid for the DDI in your total sales amount.

Example: A DDI is offered for $100 off a cooking class. The customer pays $50 for the DDI and then signs up for a class valued at $200. Your customer pays you $100 for the class. The total sales amount for the cooking class is $150 ($100 paid to you + $50 paid for the DDI).

When you accept a DDI on a partially taxable transaction, you must apply the discount equally to both the nontaxable and taxable portions of the transactions.

Example: You offer a DDI for $100 off a cooking class, which includes a bottle of wine valued at $50 provided to students at the end of class. The customer pays $50 for the DDI and then signs up for a class valued at $200. Your customer pays you $100 for the class. The wine represents 25% of the retail cost of the class ($50 divided by $200). After redemption of the DDI, the value of the wine will be $37.50 (25% of $150).

For more information, see Regulation 1671.1, Discounts, Coupons, Rebates, and Other Incentives and publication 113, Coupons, Discounts and Rebates.

Meal-Kit Providers

Meal-kit providers are businesses that send customers ingredients and recipes to prepare meals at home. These businesses typically do not provide cooking instruction as a service to customers. The meal-kits provided are generally included as part of a subscription service but may also be sold individually. Providers of these kits are generally considered the retailer of ingredients they send to customers. However, these sales are generally considered cold food sold to-go and are not taxable.

Meal-kit providers who make sales of products and services other than ingredient kits may be making taxable sales. For more information, see Other Sales.

  1. See Regulation 1603

Culinary Arts Programs

Culinary arts programs generally provide a comprehensive and structured educational curriculum designed to teach a broad range of skills and knowledge related to the culinary field. These programs may take several months or years to complete and typically provide a certificate or degree upon successful completion. Culinary arts programs are offered with the intent of providing cooking instruction, and assuming there is no separate charge for the food or meals consumed in the classroom which were provided as part of the instruction, the food or meals would be viewed as incidental to the educational services provided and generally not subject to sales tax.

A culinary arts program is mainly considered a service enterprise. As a service enterprise, these schools may make incidental use of food items as ingredients while providing the service. They are generally considered consumers of these items and should generally pay tax when purchasing them when the items are taxable.

Culinary arts programs that regularly sell tangible personal property (cookbooks, taxable meals, and so on) are considered retailers with respect to those sales, as those sales are not incidental to the service provided. If they make sales of these items, they are required to register for a seller's permit and report tax on these sales.

  1. See Regulation 1501

Private Chefs

Private chefs generally prepare meals for people in their homes. Usually, the chef's clients have already purchased the food. However, occasionally the chef purchases the food for them and obtains reimbursement for the actual amount. Private chefs who are independent contractors are considered a caterer and their charges are taxable, including those for reimbursement of the costs of food.

Registration

If you operate a cooking class making sales of meals, beverages, or other items, you are considered a retailer and must register with us for a seller's permit and file and pay your sales and use tax returns.

If you offer cooking classes, but only charge for cooking instruction and do not make any other sales, you may still be required to register with us to report and pay use tax on your purchases. For more information, please see our guide on California Use Tax.

You can use our online registration system webpage to register for a seller's permit.

Filing, Payments, and Account Maintenance

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If You Need Help (Contact Us)

If at any time you need assistance with topics included in this guide—or with topics not included—please contact us by email or by calling our Customer Service Center at 1-800-400-7115 (TTY:711). Customer service representatives are available Monday through Friday from 7:30 a.m. to 5:00 p.m. (Pacific time), except state holidays. Additional contact information and hours of operation are available on our How to Contact Us webpage.

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