Did California's 80/80 food rule apply to an off-premises caterer selling food for consumption away from its own premises?

Plain-English summary

The Board's Return Review unit asked whether an off-premises caterer qualified for a deduction under the 80/80 rule. The available file did not describe the catering business in detail, but the seller's permit application and a telephone conversation indicated that it sold food for consumption away from its own premises.

The memorandum said the 80/80 rule did not apply. That rule concerned food sold in a form suitable for consumption on the seller's premises and therefore assumed the seller had premises where customers could eat. An off-premises caterer did not fit that premise.

Instead, the applicable result depended on the services the caterer was obligated to provide under the cited food-consumption-facility or catering provisions. The memorandum did not choose between those provisions on the limited facts.

Common questions

Did failing the 80/80 analysis mean all off-premises catering sales were exempt?

No. It meant that a different rule governed; the outcome depended on the caterer's actual services.

Why was the 80/80 rule inapplicable?

The source said it applied to food suitable for consumption on the seller's premises, while this caterer sold food for consumption elsewhere.

Which rules did the memorandum identify instead?

California Sales and Use Tax Regulation 1603(f) or (h), depending on the services the caterer had to provide.

Citations and references

• California Sales and Use Tax Regulation 1603(c), (f), and (h) (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/550-0305.pdf

Original ruling text

State of California

Board of Equalization

Legal Division (MIC:82)

550.0305
Memorandum
To:

From:

Subject:

Ms. Jean McNeil
Return Review

Date:

August 20, 1991

John L. Waid
Tax Counsel
REDACTED TEXT
I am writing this to respond to your memorandum to the Legal Division of July 11, 1991. You have requested advice as to whether the above taxpayer’s sales qualify for a line 5 deduction pursuant to the 80/80 rule. Although you did not include any facts in your memorandum regarding the nature of the taxpayer’s (REDACTED TEXT) business, the Application for a Seller’s Permit and Registration as a Retailer contained in the file, and also our recent telephone conversation indicate that REDACTED TEXT is an off-premises caterer. As such, I assume that REDACTED TEXT sells food products for consumption on premises other than its own. OPINION We are of the opinion that the 80/80 rule contained in Regulation 1603(c) (the so-called “McDonald’s Rule”) does not apply to off-premises caterers. As the rule only applies to sales of food products sold in a form suitable for consumption on the seller’s premises, it assumes that the seller has premises on which food may be consumed. Such is not the case with off-premises caterers. The rules applicable to them are found in Regulation 1603 (f) or (h), depending on the nature of the services which they are obligated to provide. JLW:es 4026I cc:

Mr. O. A. McCarty, Supervisor, Return Review.