Texas Comptroller of Public Accounts    STAR System


200703903L



March 1, 2007

RE: Sales tax responsibilities of a catering company/event manager.

Dear Texas Taxpayer:

Thank you for your recent letter concerning Texas sales and use tax 
responsibilities for catering companies and event planners.  

Catering Companies:  

A caterer is defined in Texas Administrative Rule 3.293(a)(4) as anyone who 
prepares and serves meals, drinks, or other food products at a location 
designated by the customer.  A caterer is considered to be a food service 
operator, that is, someone who sells food ready for immediate consumption.  
Food prepared, sold, or served by caterers is taxable.  

A caterer must collect tax from the customer on the total price for preparing 
and serving the catered meal, including all separately stated expenses (for 
example, a charge for delivery or providing servers) billed in connection with 
the meal.  The taxable price includes any separately stated charge for the room 
or facility, and for the customer’s use of such things as tables, chairs, 
tableware, and tablecloths.  A separately stated charge for the use of these 
items is not considered a rental but an expense connected with the sale of the 
food and beverages.  

A hotel or motel that acts as a caterer does not collect sales tax on a 
separately stated charge for a room or facility if that charge is subject to 
hotel tax.  However, if a caterer bills a client a separately stated charge for 
a room or facility, the entire charge is subject to sales tax, including any 
separately stated charge for hotel taxes paid by the caterer.

The caterer must pay tax on purchases of equipment and replacement parts used 
in the catering service.  Taxable items used in catering include such reusable 
things as tables, chairs, place mats, tablecloths, cloth napkins, silverware, 
dishes, cooking utensils, dispensers, garbage can liners, mop holders, lime 
squeezers, grill bricks, aprons, glass creamers, appliances, menus, and 
inserts.  In other words, any item that a caterer uses to prepare, serve, 
present, clean up, or dispose of food in its catering service is taxable.  Gas 
and electricity used by a caterer in the preparation or storage of the catered 
food are also taxable. 

A caterer does not owe tax when buying certain wrapping and packaging 
materials.  To qualify for tax exemption, the materials cannot be reusable and 
must be given to the customer with the food and beverages.  These tax exempt 
items can be made of paper, wood, plastic, or aluminum, and include cake boxes, 
lunch boxes, cups, containers, bottle wraps, butter chip trays, dishes, knives, 
forks, spoons, napkins, soda straws, toothpicks, french fry bags, stir sticks, 
ice cream sticks, souffle cups, hot dog trays, and other types of non-reusable 
trays.  When buying these items, the caterer can give the supplier a resale or 
exemption certificate in lieu of paying tax.  See Rule 3.293, “Food; Food 
Products; Meals; Food Service” for more information.  

Event Planners: 

Event planners typically provide a variety of services and goods to clients.  
Some of those services are taxable, while others are not.   The taxability of 
charges for event planning services depends on factors such as whether the 
services are provided by a caterer in connection with the sale of food, whether 
the services are provided by a facility or venue providing taxable amusement 
services in connection with an event, whether the event is held at a venue 
owned or operated by the event planner and the type of contract between the 
event planner and the client.  

Event Held at Venue Owned or Operated by the Event Planner, or that is the 
Employer of the Event Planner:  A venue owned or operated by an event planner, 
or that is the employer of the event planner, may include amusement parks, 
theme parks, athletic facilities, restaurants, banquet halls, party rooms and 
other such locations.  

If food is prepared and served or otherwise provided by the venue hosting the 
event, tax is due on the total amount charged to the customer, including the 
event planner’s fee and charges for such items as entertainment, parking, 
security, or transportation, even if separately stated in the invoice provided 
to the customer.  The venue is considered a food service operator and the 
provisions concerning caterers found in Rule 3.293(k) and outlined above apply. 

If food is not provided by the venue where the event is held, the taxability of 
the event planner’s charges will be determined by the type of event and the 
type of contract with the client.  For example, event planning services 
provided by a venue selling taxable amusement services, such as an amusement or 
theme park, are taxable in total because the fee charged to clients is 
connected to the fee paid in order to secure the admission privilege for an 
individual or a group of individuals to the amusement park.  See Comptroller 
Rule 3.298, “Amusement Services”.  

However, a fee charged by a venue for event planning services provided for 
arranging a conference or meeting when food or admission to an amusement 
service is not included is not subject to sales tax.  

Venues hosting parties, conferences, or other events must pay sales tax to 
suppliers at the time of purchase on the purchase of all consumables, all 
equipment, and replacement parts for equipment used to provide the service and 
operate the facility.  Texas use tax is due on items purchased, leased, or 
rented from an out of state supplier and used in Texas and the venue is 
responsible for accruing and remitting tax on such items if the tax is not 
collected by the seller.  Examples of items that are taxable to the venue 
include audio video equipment, margarita machines, tables, chairs, tablecloths, 
kitchen equipment, ice sculptors, moonwalks, piñatas, and decorations.  

The venue may purchase tax-free any items that   are given to the client or the 
guests as part of a taxable event  by issuing a resale certificate to 
suppliers.  Examples of qualifying items include cellophane bags and prizes for 
“goodie” bags, souvenir matchbooks, notepads and pens and floral arrangements 
or decorations that the client or guests may take home with them.  Tax is due, 
however, on the same type of items if given to guests or clients as an 
incidental part of a nontaxable event, such as pens or notepads provided to 
attendees at a meeting.

Type of Contract: 

The type of contract between the planner and client is also a factor for 
determining the taxability of event planning services.  

Agency Agreement: 

An event planner may act as the agent of a client.  This means that the event 
planner is authorized by the client to make purchases of items and services on 
behalf of the client.  

When acting as an agent, the event planner cannot mark up the price of the 
items purchased and billings to the client for the purchases must reflect the 
actual amount paid to suppliers for the item, including sales and use tax if 
applicable.  If the event planner purchases items on behalf of  a client, the 
event planner must pay tax to the seller for taxable items.  Subsequent 
billings to the client must reflect the actual price paid and any tax must be 
clearly shown as a “tax reimbursement.”  Tax is not due on charges for planning 
services that are separately stated and not calculated on a percentage of the 
items billed to the client. 

An event planner will be considered an agent of a client if the event planner 
discloses to suppliers that it is acting as agent for the client designated on 
a purchase order or in some other written documentation and maintains 
accounting records and invoices which evidence that the billing to its clients, 
except for service charges, is identical to that paid to suppliers. 

When an event planner acts as an agent for a customer in acquiring taxable 
items, the event planner may not issue a resale certificate to a supplier in 
lieu of tax.  The event planner should pay or accrue tax at the time of the 
purchase and then bill the client for the exact amount of the purchase, 
including the tax.  Payment received from the client is considered 
reimbursement for the purchases and no additional tax is due provided that the 
invoices or receipts issued by the event planner to the customer are clearly 
marked with a statement indicating that tax was paid on all taxable items 
purchased.  A handling or service fee charged by the event planner to the 
client for a reimbursable purchase is not taxable as long as the fee is 
separately stated and is not based or calculated on the charge for the item. 

Under an agency agreement, if an event planner makes arrangements with a 
third-party restaurant or caterer (as an agent of the client) to provide meals 
or food for an event, the restaurant or caterer must collect sales tax on its 
charges to the customer or the customer's agent for the taxable meals it 
provides.  The event planner may not give a resale certificate for the purchase 
of meals or food.

“Turn-key” Contracts:

Under a “turn-key” or lump sum contract, an event planner charges a client one 
total amount for all goods and services provided, including such items as 
consultation, set up, delivery and administrative services.  

A lump sum charge for event planning services provided in connection with an 
event where food is served, such as a banquet, party, wedding reception or 
where a taxable amusement is provided is taxable.  

Event planner as a caterer (turn-key contracts) 

If an event planner prepares and serves food at an event, the event planner is 
considered a caterer and is required to collect tax on the total amount charged 
to the client, including charges for consultation, the event facility and any 
items used by the client, such as tables, chairs and tablecloths. See 
Comptroller Rule 3.293(k) and the information about catering above.  

Under a turn-key contract, the event planner is the consumer of all services 
and items purchased, leased or rented for the event.  The event planner must 
pay tax to suppliers when purchasing taxable items such as decorations, 
equipment and consumable supplies, parking services, security services and 
cleaning services.  An event planner operating under a turn-key contract may 
not issue a resale certificate when making these purchases.   The event planner 
may issue a resale certificate when purchasing items that will be transferred 
to the customer.  For example, an event planner may purchase catering services 
tax-free for resale when billing their client under a turn-key or lump sum 
contract.  The event planner must then collect tax on the entire amount charged 
to the client. 

Meetings (turn-key contracts) 

A charge to a customer for a turn-key contract for event planning services 
provided for a nontaxable event such as a meeting or convention is not taxable. 
Snacks or beverages provided at a meeting or convention will not render the 
event taxable if the charge attributable to the food or beverage service does 
not exceed 5 percent of the total charge for the event.  The event planner is 
responsible for paying tax to the supplier of the incidental food or beverage 
service and is not required to collect tax from the customer.  

For example, assume an event planner is hired to coordinate a meeting by 
arranging for the facility, tables, chairs, audio video equipment and a 
beverage service.  The total amount charged to the client for the service is 
$1000.00.  The event planner’s normal selling price for a beverage service is 
$50.00.  Since the amount attributable to the beverage service is 5 percent or 
less of the total contract amount, the entire charge to the client is not 
taxable.  The event planner is considered the consumer of the beverage service 
and is responsible for paying the tax to the supplier.  

Separated Contracts:  

Under a separated contract, an event planner separately states all charges to 
the client.  The event planner is considered the seller of the items and 
services provided and must collect tax from the customer on the total amount 
charged for each taxable item. The tax rate must be applied to the agreed 
contract price of the items, or to the price of the items to the event planner, 
whichever is greater, including any associated charges such as transportation 
or delivery.  

However, a separately stated charge for event planning services such as 
consultation or administration is not taxable if the fee is not directly 
connected to, or calculated on, the sale of a taxable item.  

All charges related to providing or serving food or beverages, or providing 
other taxable services or items, are taxable to the client.   These include 
charges for the facility, servers, tables and chairs, table cloths and audio 
visual equipment.  Charges for parking, security services, decorations, 
invitations and clean up are also taxable items.  The event planner must 
collect tax from the customer on the total amount charged for such services 
even if separately stated from the charge for food or beverages.  

An event planner operating under a separated contract may issue a resale 
certificate when purchasing taxable items that will be transferred to the 
client or the guests at the event.  Examples include such items as souvenir 
matchbooks, paper napkins, food provided by a third party caterer and floral 
arrangements or other decorations that the client or guests may take with them. 
An event planner operating under a separated contract may also issue a resale 
certificate when purchasing non-reusable, consumable items such as crepe paper, 
candles, and balloons.  In addition, event planners operating under a separated 
contract may issue a resale certificate when purchasing taxable services such 
as security, parking and cleaning provided at an event.  Sales tax should be 
collected on the entire amount charged to the customer for such items.  

However, the event planner is responsible for paying or accruing tax on all 
equipment purchased, leased or rented for use during or in preparation for an 
event and on any taxable services that are directly used by the event planner.  
Examples include such items as computers, printers, graphic arts, margarita 
machines, audio visual equipment, moonwalks and data processing services.  The 
event planner may not issue a resale certificate when purchasing such items, 
even if the planner separately states a charge for the equipment to the 
customer.  

The event planner must also pay or accrue tax at the time of purchase on 
decorations, floral arrangements and similar items used during an event that 
remain the property of the event planner after the event.  Examples include 
candle holders, arches and trellises, carpet runners and portable dance floors. 

Entertainment:  

Separately stated charges for entertainment such as a disc jockey, band or 
singer are not taxable unless included as part of a contract with a venue 
hosting an event.  For example, a charge for a clown to appear at a birthday 
party is not taxable.  However, if an entertainment venue such as a party room 
hires a clown to appear at a party, the party room must collect tax on the 
entire charge to the customer, including the portion attributable to the clown 
performance.  The charge made by the clown to the event planner or venue 
remains nontaxable.  

The entire text of the Tax Code, a complete set of rules, and a wealth of other 
information are available on the Window on State Government web site at 
www.window.state.tx.us.  You may find the sales tax rules by first clicking on 
"Sales Tax" under the Quick Links and then by clicking on "Rules" at the top of 
the web page.

This opinion is based on the facts you submitted.  Other facts, though similar, 
may yield different results.

I hope this information helps.  If you have further questions, please e-mail me 
at robin.corrigan@cpa.state.tx.us., or you may reach me by phone at 
1-800-531-5441, ext. 3-1810.

Our goal is to provide you with prompt, professional service. Please take a 
moment to complete our on-line survey at: 
http://aixtcp.cpa.state.tx.us/surveys/tpsurv/

Sincerely,


Robin Corrigan
Tax Policy Division




ACCESSION NUMBER: 200703903L
SUPERSEDED: N
DOCUMENT TYPE: L
DATE: 03/01/2007
TAX TYPE: SALES