Did a shopping-center doughnut shop owe tax on bulk doughnuts sold for off-premises consumption because the center provided a general parking lot?

Plain-English summary

A doughnut shop supplied tables and chairs, including patio tables, within a shopping center. The submitted drawing indicated that the parking area served patrons of the entire center rather than being provided mainly for customers eating the shop's products.

On that assumption, tax counsel did not treat the business as a drive-in. The shop still had to collect tax on doughnuts eaten on its premises and at its patio tables.

Bulk quantities sold for consumption away from the premises were not taxable under the historical rule, and purchasers did not need to sign statements for those bulk sales. The general shopping-center parking lot also meant the shop was not held to the drive-in's complete and detailed record requirements described in Bulletin 64-4.

Common questions

Did the common parking lot count as the shop's eating facility?

No, because the letter assumed it was for general shopping-center use rather than primarily for the shop's patrons.

Were doughnuts eaten at the shop taxable?

Yes. The source expressly required tax on doughnuts consumed on the premises or at patio tables.

Did bulk takeout buyers need signed statements?

No, under the submitted facts and historical rule.

Citations and references

• General Business Taxes Bulletin 64-4 (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/550-0580.pdf

Original ruling text

550.0580

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

November 6, 1964

Mr. J--- R. R--L---’s Donut Shop
XXXXX --- --- Boulevard
--- ---, California

-- - XXXXXX

Dear Mr. R---:
This is in reply to your letter of October 16 in which you inquire about the application of the Sales and Use Tax Law as it affects a doughnut shop. The drawing of your location in the shopping center implies that the parking area is for the general use of the patrons of the shopping center as a whole and are not provided primarily for the use of you patrons in consuming the products purchased at your shop. If such is the case, your business would not be held to be a “drive-in.” Accordingly, you would not be so strictly held to the complete and detailed record requirements of General Business Taxes Bulletin 64-4 (copy enclosed). So long as you are collecting the tax on the doughnuts eaten on your premises and at your patio tables, the sales tax would not apply to doughnuts sold in bulk quantities, and a signed statement by the purchasers of bulk doughnuts is not necessary. If you have any further questions, please do not hesitate to write to us again. Very truly yours,

E. H. Stetson
Tax Counsel
By ____
Philip R. Dougherty

PRD:md
Enclosure