Could a caterer exclude charges for parking, security, and wrap attendants from taxable meal receipts?

Plain-English summary

A caterer had reported some labor charges as waitresses but said part of the total actually paid for parking attendants, security guards, wrap attendants, and other services unrelated to food and drink service.

Tax counsel agreed those non-food service charges could be excluded if the caterer identified the particular amounts and affirmed that the workers did not also participate in serving food or drinks. Without records presented for field verification, the letter allowed no adjustment to the $5,258 audit measure in that category.

The letter separately accepted evidence that bartender billings were merely an accommodation to customers for the audit period. For future transactions, however, the caterer had to retain letters from the customer and bartenders showing that the customer directly solicited their employment; otherwise the amounts would be included in the charge for serving meals, food, and drinks.

The source also deleted a $1,412 item as exempt food products and a $5,294 item as customer-accommodation billings. Further action remained delayed for 30 days so the caterer could document the disputed non-food labor.

Common questions

Could every separately labeled labor charge be excluded?

No. The caterer had to identify the charge and show the worker did not also serve food or drinks.

Were bartender billings automatically excluded?

No. The source accepted the evidence only for the audited period and required transaction-specific letters for future periods.

Did the letter immediately grant the full requested adjustment?

No. It allowed 30 more days for supporting information and otherwise directed completion of the reaudit as described.

Citations and references

• Sales and use taxes ruling 53(e) (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/550-0480.pdf

Original ruling text

STATE OF CALIFORNIA

550.0480

STATE BOARD OF EQUALIZATION

March 8, 1966

Mrs. E--- F. L--XXXX --- Avenue
--- ---, CA XXXXX

SR -- XX XXXXXX

Dear Mrs. L---:
After receiving your most recent correspondence and attachments, we have made a further review of your petition for redetermination of sales and use taxes. We have concluded that the information presented together with your previous explanations should be accepted as sufficient evidence that the billings for bartenders were made only as an accommodation for your customers. However, our conclusion on this item is expressly limited to the period covered by the deficiency determination. For future periods, you should retain in your files letters from your customer and the bartenders sufficient to evidence that their employment was solicited by the customer directly. This should be done for each catered transaction. If such evidence is not retained, these amounts will hereafter be included in the measure of tax as part of your charges for serving meals, food and drinks. (See sales and use taxes ruling 53, paragraph (e), copy enclosed.) We have also given further consideration to your contention that the amount identified as item B of the report of field audit, measure of tax $5,258 included charges for services not connected with the service of food and drinks. We understand that these charges were billed as “waitresses,” and claimed on your sales and use taxes returns as “labor.” Notwithstanding the opinion expressed in our letter of December 6, 1965, we shall exclude charges for such services as parking attendants, security guards, wrap attendants, etc., provided you can identify the particular charges involved and are willing to affirm that the personnel who performed these services did not also participate in the service of food and drinks. We fail to understand the basis for the statement contained in your recent letter that some of the item 2 charges (item B of the report of field audit) “are so far afield of my records they seem to be arrived at by conjecture and imagination.” The amounts included in this category reconcile completely with the amounts claimed on your sales and use taxes returns as “labor” for the audit period. However, if you can point out any specific instances where the figures are incorrect, appropriate adjustments will be made.

Mrs. E--- F. L--SR -- XX XXXXXX

-2-

March 8, 1966
550.0480

We summarize the results of our review and further action to be taken as follows: 1.

Item A of the report of field audit, measure of tax $1,412, is to be deleted as a sale of exempt food products.

2.

Item D of the report of field audit, measure of tax $5,294, is to be deleted as representing amounts billed as an accommodation for customers.

3.

No adjustment will be made for any of the charges identified in the report of field audit as item B, measure of tax $5,258, unless charges not connected with the sale of catered food and drinks are identified and presented to the field staff for verification.

Further action on this matter will be delayed for an additional thirty days to allow time for you to accumulate and make available the required information to support an adjustment to item B. If such information is not made available in this period, the reaudit will be completed as indicated above. Very truly yours,

W. E. Burkett
Associate Tax Counsel

WEB:em
Enclosures
Cc:
Mr. Fred T. Larsen
Inglewood – Subdistrict Administrator
The action indicated with respect to the charges for parking attendants, security guards, wrap attendants, etc., represents a change of the position expressed in our letter of December 6, 1965. This was done after further review and discussion of the application of the law and ruling with Tax Counsel E. H. Stetson. I might add that I am not completely satisfied with the evidence offered to establish that the charges for bartender were mere accommodation billings. However, weighing the amount involved and other considerations, I have concluded that the proper approach is to accept the taxpayer’s explanations and evidence and place her on notice as to what will be required to document this for future periods. WEB