Did the 80/80 rule tax a gourmet caterer's cold food sold to go when the caterer had no on-site tables or chairs?

Plain-English summary

A gourmet caterer reported that more than 80% of its gross receipts came from food products and more than 80% of those food sales were taxable. It also sold cold food to go but had no tables, chairs, or other on-site eating facilities.

The statutory 80/80 rule applied to food suitable for consumption on the seller's premises, and the implementing regulation named restaurants, fast-food establishments, concessionaires, soda fountains, and similar establishments. The Board concluded that a catering business with no on-site eating facilities was not similar to those businesses.

The caterer's cold food sold to go was therefore not taxed under the 80/80 rule despite its sales percentages. An internal note two days later confirmed the same no-facilities condition.

Common questions

Did exceeding both 80% tests automatically make the cold takeout food taxable?

No. The business also had to fit the covered type of establishment and sell food suitable for consumption on its premises.

Why did the caterer fall outside the rule?

It had no on-site eating facilities and was not treated as similar to a restaurant, fast-food establishment, concessionaire, or soda fountain.

Would adding tables or chairs matter?

Potentially. The source's conclusion expressly depended on the absence of on-site eating facilities.

Citations and references

• California Revenue and Taxation Code sections 6051, 6359(a), and 6359(d)(6) (as cited)
• California Sales and Use Tax Regulation 1603(c) (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/550-0824.pdf

Original ruling text

550.0824

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
September 15, 1987
Dear Mr. REDACTED TEXT,
Your letter requesting an opinion concerning the correct application of tax to certain sales of “cold food to go” has been referred to me for a reply. As I understand the facts, you are the owner of REDACTED TEXT, a gourmet catering service. You write that over 80 percent of REDACTED TEXT’s gross receipts are from sales of food products and more that 80 percent of those sales are taxable. You also write that the REDACTED TEXT makes sales of cold food products to go; however, the REDACTED TEXT has no on-site eating facilities such as tables or chairs. It is your understanding that such sales of cold food to go are not subject to tax. Except where the sales are specifically exempted by statute, sales tax applies to the gross receipts of retailers from all retail sales of tangible personal property in this state (Rev. & Tax. Code
§605l). Section 6359(a) of the code exempts the sale of food products for human consumption from tax; however, section 6359(d)(6) provides that tax applies to the sale of food products as follows: “When the food products sold are furnished in a form suitable for consumption on the seller’s premises, and both of the following apply: (A) Over 80 percent of the seller’s gross receipts are from the sale of food products. (B) Over 80 percent of the seller’s retail sales of food products are sales subject to tax pursuant to paragraphs 1 [sale of food products sold as a meal], 2 [food products furnished, prepared or served for consumption at facilities provided by the retailer], 3 [food products ordinarily sold for immediate consumption at an establishment which is defined as a ‘drive-in’], or 7 [products sold as hot prepared food.].” Further, Sales and Use Tax Regulation 1603(c), which interprets and applies section 6359(d)(6), provides, in pertinent part, the following: “Tax applies to sales of food products such as ice cream, milk, milkshakes, hot and cold coffee, cold sandwiches, and donuts furnished in a form suitable for consumption on the seller’s premises, when sold by restaurants, fast-food establishments, concessionaires, soda fountains, and other similar establishments, even though such food products are sold on a ‘take-out’ or ‘to go’ order.” (Emphasis added.) Applying the above criteria, it is our opinion that a catering business that has no on-site eating facilities, such as tables or chairs, is not an establishment that is similar to a restaurant, fast-food establishment, concessionaire or soda fountain. Therefore, “REDACTED TEXT”, as described, is

REDACTED TEXT

-2-

September 15, 1987
550.0824

not subject to the provisions of section 6359(d)(6) and Regulation 1603(c) and, accordingly, REDACTED TEXT’s sales of “cold food to go” are not subject to tax. I hope the above information is helpful. I am enclosing for your review and reference a copy of Sales and Use Tax Regulation 1603 (Taxable Sales of Food Products). If you have any further questions concerning this topic, please do not hesitate to write this office. Very truly yours, Robert J. Stipe Tax Counsel RJS:sr Enc. cc:

M. Lauchi, Return Review

bc:

REDACTED TEXT District Administrator

bc:

Mr. Glenn Bystrom
On 9/17/87 you and I discussed this letter and we concluded that a caterer’s sale of cold food to go was not subject to the provisions of section 6359(d)(6) and Regulation 1603(c) provided the caterer’s place of business contained no on-site eating facilities such as tables and chairs. Mr. Donald J. Hennessy