Caterers and event planners wear multiple hats when it comes to their New York sales and use tax obligations. They often cover a wide range of services and tangible property with the potential for varying taxability. Like other industries that offer a combination of property and services, caterers often have duties as both a consumer and retailer, which can create both sales and use tax liabilities in their operations.
The New York Department of Taxation and Finance offers guidance in TB-ST-110 for how caterers and event planners should handle their sales tax obligations under different scenarios. In this article, we’ll explain that guidance in more detail and identify other issues for catering companies and event planning businesses to consider when challenged with an audit or assessment.
Collecting Sales Tax on a Caterer’s Charges to Customers
A caterer or event planner’s overall sales to a customer are taxable in New York. This includes charges for expenses of other property and services the caterer purchases to provide its services under the transaction. Sales tax applies even if the expenses are separately stated from the caterer’s service charges on the invoice and include items that were nontaxable to the caterer at the time of purchase.
Gratuity and other tips voluntarily left for a caterer’s wait staff are not generally taxable. However, mandatory gratuities included in the bill could be taxable unless a few conditions are met. The caterer must separately state and identify the gratuity charge on the bill. All of the proceeds from the gratuity charge must be given to the employees. See TSB-M-09(13)S, Sales Tax on Gratuities and Service Charges for additional details.
Distinguishing Taxable and Nontaxable Food or Drink as a Caterer in New York
New York has a mixed approach to the taxation of food sales as explained in TB-ST-283. Most raw food products and ingredients you would purchase at a grocery store are exempt from sales tax. However, notable exceptions to this rule are the following:
- Sandwiches
- Soda and other carbonated beverages
- Candy
In addition to these items, New York also taxes the sale of food and drink that meet any of the following conditions:
- Heated food
- Food prepared by the seller
- Food sold for consumption on the premises where it is sold
Caterers and event planners likely incorporate both taxable and nontaxable food in their business operations. For example, a wedding may involve food that is taxable because it is heated and prepared by the caterer while the wedding cake and other desserts are exempt from New York sales tax as baked goods. Taxable food that a caterer purchases for their clients can be made using Resale Certificate Form ST-120, or if sales tax is paid, a credit may be available on their return.
How New York Sales Tax Applies to Flowers Used in an Event
A caterer can use a Resale Certificate to purchase flowers, but several conditions must be met. Otherwise, sales tax will be due at the time of purchase from the florist. The event planner or caterer must meet the following requirements to purchase flowers with a Resale Certificate:
- The customer has the discretion to not purchase flowers.
- The customer has the ability to work directly with the florist.
- The customer has control over the flower selection and arrangement.
- The caterer must maintain records of flowers purchased for resale, including details of the customer and florist.
- The flowers bought for resale can only be used for one customer’s event.
- The caterer must collect sales tax on the entire charge to the customer.
Rentals and Equipment Used as Part of an Event or Catering Service
Caterers and event planners require a significant amount of equipment and other supplies to provide their services. For example, a caterer likely needs kitchen equipment, silverware, and other serving items. Event planners may also rent or lease other property used in their business, such as tables, chairs, linens, and other decorations. The caterer is generally viewed as a consumer in the purchase of these items because they do not transfer to the caterer’s customer. As a result, sales tax is usually due to the caterer’s supplier at the time of purchase.
How New York Sales Tax Applies to a Caterer’s Purchase of Services from Third-Party Vendors
Along with equipment and other supplies, an event planner may need to expense additional services from other third-party vendors. Some of these services are taxable, such as for decorating, parking, security, and waste removal, and the caterer must pay sales tax to the vendor. However, other services are nontaxable, including a hired band or DJ, bartenders, photographers, wait staff, and valet service. The caterer won’t pay sales tax to the vendor of these nontaxable services, but the caterer must collect sales tax from its customer for these expenses incorporated into the bill.
Items to Consider When Identifying New York Sales and Use Tax Obligations as a Caterer
New York sales and use tax obligations for caterers and event planners can become increasingly complex because of the many different transactions with vendors and their varying taxability. Key issues that could create sales tax problems for an event planner in New York may include the following:
- Purchasing equipment, rentals, and other supplies with a resale certificate
- Under-collecting sales tax from customers for items on the catering invoice, such as third-party vendor services.
- Not keeping adequate records showing sales tax paid purchases made with a resale certificate.
- Disregarding complex sales tax rules for unique items like flowers and gratuity.
Consult with a New York Sales Tax Professional During an Audit or Assessment
The challenges you face with New York sales and use tax as a caterer or event planner will vary with the extent of your services and how you transact with both customers and vendors. Understand that you likely have obligations as a consumer of taxable items in New York and as a retailer that provides taxable goods and services to customers. Like other food and service businesses, caterers often receive scrutiny from the New York Department of Taxation and Finance through audits and other inquiries to confirm adequate taxes have been paid. In these moments, a sales tax professional can be a valuable addition in providing audit defense or managing an appeal of an over-assessment.