Were a caterer's charges for bartenders, waitresses, and cooks excluded from taxable meal receipts because the workers were classified as independent contractors?

Plain-English summary

A caterer billed customers for bartenders, waitresses, and cooks hired to cater meals. The Department of Employment had classified those workers as independent contractors rather than employees.

Associate tax counsel said that classification did not exclude the charges from tax. Ruling 53(e), as quoted in the letter, applied tax to a caterer's entire charge for serving meals, including the labor of serving them. As long as the caterer billed customers for that labor, the charges formed part of its gross receipts.

The same letter recommended allowing separately billed rentals of heavy equipment such as tents and awnings when provided as a customer accommodation because those items were unlike the dishes, furniture, and similar service items listed in the ruling.

It also said rentals of dishes or glasses could be excluded when the caterer neither furnished nor served the food, but only if those charges were clearly segregated in the records. The recommendation was still to be presented to the Board; the source does not contain the final action.

Common questions

Did independent-contractor status make meal-service labor nontaxable?

No. The source focused on whether the caterer billed the labor as part of serving meals.

Were tent and awning rentals treated the same as dishes and tables?

No. The letter recommended an allowance for separately billed heavy-equipment rentals provided as an accommodation.

Could dish or glass rentals be excluded?

Yes, where the caterer furnished and served no food and clearly segregated the rental charges in its records.

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/550-0860.pdf

Original ruling text

550.0860

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

October 17, 1966

Dear Mrs. REDACTED TEXT,
This is to inform you of our conclusions with respect to your petitioner for redetermination of sales tax. It is our recommendation that an allowance be made where you rent heavy equipment such as tents and awnings for your customers as an accommodation and separately bill them on your invoices. With this adjustment, we are recommending the tax be redetermined. Sales and use taxes ruling 53(e) provides in part that, “Tax applies to the entire charges made by caterers for serving meals, food, and drinks, inclusive of charges for food, the use of dishes, silverware, glasses, chairs, tables, etc., used in connection with serving meals, and for the labor or serving the meals.” Such items as tents and awnings do not come within the items listed in this sentence. “Etc.” must be construed to mean items of a similar nature as the other items listed. Where you rent items listed in the sentence, however, tax applies to charges made for them. At the hearing, you also raised other questions concerning the application of tax to your business. One of these was the taxability of renting dishes or glasses where you do not provide the food products to be served on or in them. Such rentals are not subject to tax provided that you neither furnish the food nor serve the food. In such cases, you must clearly segregate such charges in your records so that our auditors can identify them. You also raised the questions about personnel such as bartenders, waitresses, and cooks which you hire to cater a meal. You state that these personnel have been determined by the Department of Employment to be independent contractors rather than employees. We believe their status as independent employees is not sufficient to exempt charges you make for their service in connection with serving meals. The quoted portion of ruling 53 provides that tax applies to the entire charges made by caterers for serving meals. This is inclusive of charges “for the labor of serving the meals.” So long as you bill your customers for the labor, they form a part of your gross receipts.

Our auditors will make the adjustment explained above and will inform you of its amount. It will then be presented to the board with our recommendation for their consideration. You will receive official notice of its action in due course. Very truly yours, John H. Knowles Associate Tax Counsel JHK:ab cc:

Los Angeles District – District Administrator
West Los Angeles – Subdistrict Administrator
Attached are two copies of hearing officer’s report dated October 11, 1966, which has been approved. This hearing was held in Hollywood on July 18, 1966.