Were an office-lobby espresso cart's pastries, cold food, juice, coffee, tea, and espresso sales exempt when no eating facilities were provided?

Plain-English summary

A prospective operator planned an espresso cart in an office-building lobby. The cart would sell pastries, cookies, tea, coffee, espresso, cold juice or lemonade slush, and premade cold sandwiches and salads. Customers would receive beverages in paper cups, and neither the operator nor the building owner would provide tables or chairs for consuming the products.

The Board concluded that the described sales were exempt. Disposable glasses were not eating facilities by themselves, and the building supplied no place intended for consuming the cart's food. Separately priced hot coffee, tea, and espresso remained exempt under the cited hot-beverage rule.

Bundling changed the result for the hot drink. If coffee, tea, or espresso was sold for one lump-sum price with another food product—for example, coffee and a pastry for one price—the hot beverage was taxable.

Common questions

Did paper cups and disposable serving items count as eating facilities?

No. The source said disposable glasses were not taxable facilities by themselves.

Were coffee, tea, and espresso exempt?

Yes, when separately priced and sold under the stated no-facilities facts.

What if the cart sold coffee and a pastry for one price?

The letter said the hot beverage would be taxable when sold for a lump sum with other food products.

Did the letter cover a building with tables or chairs for customers?

No. Its conclusion depended on the assumption that neither the cart operator nor the building owner provided consumption facilities.

Citations and references

• California Revenue and Taxation Code sections 6051, 6091, and 6369 (as cited)
• California Sales and Use Tax Regulations 1602 and 1603(e) and (f) (as cited)
• Market St. Ry. Co. v. California State Board of Equalization and Standard Oil Co. v. State Board of Equalization (as cited)

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/550-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/550-0090.pdf

Original ruling text

550.0090

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

MEMBER
First District

1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-3828

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles

February 10, 1993

GRAY DAVIS
Controller, Sacramento

Mr. A--- D--A--- C--P.O. Box XXXX
---, California XXXXX

BURTON W. OLIVER
Executive Director

Re:

[No Permit Number]
Sales by Espresso Cart

Dear Mr. D---:
Your letter dated December 31, 1993, was forwarded to the Legal Division for response. You ask for written confirmation of verbal advice you indicate you received to the effect that your sales operations are not subject to sales tax. You describe your business as follows: "We plan to put an espresso cart in operation inside the lobby of an office building. There will be no table or chairs provided to sit down. Office workers will come to the carts, make their purchases and return to their offices or find somewhere to sit outside on cement or grass. All beverages to be served in paper cups." You list the products you intend to sell as pastries, cookies, tea, coffee, espresso, cold juice or lemonade slush, and cold sandwiches and salads that you will buy pre-made from a deli for building customers. Apparently the building owner does not provide facilities for its workers to consume your products. It also appears that your hot drinks will sell for a separate price. OPINION A.

Sales and Use Tax Generally.

In California, except where specifically exempted by statute, Revenue and Taxation Code Section 6051 imposes an excise tax, computed as a percentage of gross receipts, upon all retailers for the privilege of selling tangible personal property at retail in this state. (Unless otherwise stated, all statutory references are to the Revenue and Taxation Code.) "[I]t shall the

Mr. A--- D---

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550.0090

presumed that all gross receipts are subject to tax until the contrary is established. The burden of proving that a sale of tangible personal property is not a sale at retail is upon the person who makes the sale ..." (§ 6091.) "Exemptions from taxation must be found in the statute." ("Market St. Ry. Co. v. Cal. St. Bd. of Equal. (1953) 137 Cal.App.2d 87, 96 [290 PO.2d 201.] The taxpayer has the burden of showing that he clearly comes within the exemption." Standard Oil Co. v. St. Bd. of Equalization (1974) 39 Cal.App.3d 765, 769 [114 Cal.Rptr. 571].) B.

Food Products Exemption.

Section 6369, interpreted and implemented by Regulations 1602 and 1603, provides an exemption from sales and use taxes for sales of food products for human consumption under certain circumstances. Subdivisions (1) & (2) of Regulation 1602(a) contain lists of products which, either singly or in combination, are considered "food products." (Sales and Use Tax Regulations are Board promulgations which have the force and effect of law.) Effective December 1, 1992, "snack foods" are considered "food products with the result that sales of such products are exempt after that date. However, under certain conditions, sales of food products are subject to tax. Sales of hot prepared food products are taxable. Although hot coffee is considered a "hot prepared food product," its sale for a separate price is exempt from tax unless otherwise specifically provided. (Reg. 1603(e).) Regulation 1603(f) provides that tax applies to sales of food products sold in a form suitable for consumption at tables, chairs, or counters or from trays, glasses, dishes, or other tableware provided by the retailer or by a person with whom to retailer contracts to furnish, prepare, or serve food products to others. C.

Tax Consequences.

It has long been our position that disposable glasses are not taxable "facilities" in and of themselves. We have assumed that the owner of the building does not provide tables and chairs for the consumption of your food products. Also, you apparently will be selling the hot drinks for a separate price. We conclude that your sales of food products from an espresso cart are exempt from tax. Your sales of coffee, tea and espresso will be subject to tax, however, if they are sold for a lump sum price with other food products - e.g., coffee and pastry for one price. For your information, I have included a copy of Regulation 1603. I hope the above discussion has answered your question. If you need anything further, please do not hesitate to write again. Sincerely,

John L. Waid
Tax Counsel

Mr. A--- D---

JLW:es
Enc.: Reg. 1603

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