Could an employer give a caterer a resale certificate when the caterer furnished meals and the employer charged employees through payroll deduction or another method?

Plain-English summary

Under the then-current section 6363 and Ruling 53(F), meals sold by employers to employees working on a particular project or undertaking were specifically exempt.

When an employer hired an outside caterer to prepare and furnish meals and then charged employees through payroll deduction or another method, the letter treated the employer as buying the meals for resale. The employer could give the caterer a resale certificate.

The result changed if the employer merely authorized the caterer to sell directly to employees. Then the employer did not buy the meals for resale, and the caterer's direct sales were outside the cited employer exemption.

The source said the contract terms determined which relationship existed and invited submission of the contract for a transaction-specific opinion.

Common questions

Did payroll deduction support employer resale treatment?

Yes, when the employer was the party charging employees for meals it bought from the caterer.

Could a direct-selling caterer rely on the employer's exemption?

No. The letter said those were direct caterer-to-employee sales.

What controlled which party made the sale?

The contract terms and actual transaction structure.

Citations and references

• California Revenue and Taxation Code section 6363 (as cited)
• Sales and use tax Ruling 53(F) (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/550-1160.pdf

Original ruling text

550.1160

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
May 5, 1950
REDACTED TEXT
Gentlemen:
This is in answer to your letter of April 21, to which was attached a copy of our letter of November 7, 1947. Under Section 6363 of the Revenue and Taxation Code and Sales and Use Tax Ruling 53 (F) the sales of meals by employers to employees engaged in work upon a particular project or undertaking are specifically exempted from the tax. Accordingly, an employer who engages an outside caterer to prepare and furnish meals for which the employer makes a charge to the employees through payroll deduction or otherwise, is regarded as purchasing the meals for resale to his employees and may properly furnish a resale certificate to the caterer. The situation would, of course, be otherwise if the employer merely authorizes a catering company to sell the meals to the employees. In this case the sale of the meals would not be made to the employer for resale to the employees but directly by the caterer to the employees, and such sales would not be within the exemption of Section 6363. The terms of your contract with the employer determine whether or not you may be properly regarded as selling the meals to the employer for resale and if you wish to forward a copy of the contract for examination, we shall give you our opinion with respect to the specific transaction. Very truly yours E. H. Stetson Tax Counsel EHS:ph