Was a fixed-wage dining-room supervisor the seller of meals when the corporation owned the facilities, bought the food, set prices, billed patrons, and controlled the staff?

Plain-English summary

A corporation owned a small dining room for executives and top talent. It owned the facilities and equipment, bought the food, set meal prices, billed patrons on its own invoices, collected the money, and reported the applicable excise taxes.

The individual under audit received only a fixed weekly wage for supervising meal preparation and service. He handled no operating money, had no financial control, and could not select, set the wages of, or fire the workers carried as his employees for union appearances.

Tax counsel concluded that he did not sell the meals and received no subsidy. Because the corporation had reported tax on the patron charges, counsel recommended granting his petition and deleting the asserted measure of tax.

Common questions

Why was the supervisor not treated as the seller?

He did not own the food, receive the sale proceeds, set prices, or control the dining room's finances or staffing.

Did the letter find an untaxed subsidy?

No. It concluded that the supervisor received no subsidy and noted that tax had already been reported on the amounts charged to patrons.

Was this the Board's final decision?

The source is a tax-counsel recommendation to grant the petition; it does not include later final Board action.

Citations and references

• The complete supporting letter cites no numbered statute, regulation, or case.

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/550-0900.pdf

Original ruling text

STATE OF CALIFORNIA

550.0900

STATE BOARD OF EQUALIZATION

August 6, 1969

Mr. J--- S. W----- and --Attorneys at Law
X --- ---, XXth Floor
--- --- at --- ----- ---, CA XXXXX
SR -- XX XXXXXX
G--- J--Dear J---:
This is with reference to the petition for redetermination filed on behalf of Mr. G--- J--- and the hearing held on the matter last July 16 in Hollywood. The sole issue is whether Mr. J--- sold meals in the C--- P--- E--- Dining Room, and if so, were the sales subsidized by C--- P--- Corporation. There seems to be no dispute as to the facts. C--- owned all of the facilities, fixtures and equipment used to operate the dining room. The dining room was small, seating only about thirty persons. It was restricted to use by C--- executives and top talent, and although meal prices, set by C---, were average and reasonable, the operation showed a loss by reason of its small volume. C--- purchased and paid for the food in its own name. C--- billed the patrons on its own invoices and received the money from the patrons. Mr. J--- did not handle any money necessary to operate the dining room and was not held accountable to C--- for any. Mr. J--- did not set the prices to be charged for the meals and no meals were sold for cash. Instead the patrons signed a C--- chit for the meals they purchased.

Mr. J--- S. W--(SR -- XX XXXXXX)

-2-

August 6, 1969
550.0900

All Mr. J--- received was a fixed weekly wage for supervising the preparing and serving of the meals. C--- personnel made all disbursements, including the reporting and payment of applicable excise taxes. It paid all appropriate employees taxes on behalf of Mr. J---. The latter included the employment of two waiters and one busboy who were carried, for union appearances, as employees of Mr. J---. Mr. J--- did not select them as employees, he did not fix their wages, and he could not fire them. It is our conclusion that Mr. J--- did not sell the meals in question. Since he did not own the food before or after it was sold, did not receive the receipts from the sale, did not have any say in the financial operations of the dining room at all, it is difficult to see how he can be construed as having sold the meals on his own behalf. In any event, it is our opinion that he did not receive any subsidy, and since tax was reported and paid on the sums charged the patrons, there is no liability on Mr. J---’s part in the operation of the dining room. Accordingly, we are going to recommend that the petition for redetermination be granted and the measure of tax be deleted. Sincerely,

Robert H. Anderson
Tax Counsel

RHA/vs