Does a restaurant owe sales tax on the trays, platters, and lids it buys and gives customers with food?

Plain-English summary

A quick-serve restaurant asked whether it owes sales tax on the catering trays and lids it buys to serve sandwich platters. The Department's answer is a test, not a verdict (this is a General Information Letter, which doesn't make a binding determination).

Colorado taxes retail sales of tangible personal property, so a restaurant normally pays sales tax when it buys supplies. But there's an exemption for an article, bag, or container a food vendor gives the customer for free along with the food — if ownership and possession pass to the customer and the item is essential to the food sale. The exemption does not apply to items that are "not essential" — those "primarily used for the convenience of the consumer and not necessary to transfer the food to the consumer."

The Department's regulation (1 CCR 201-4, Reg. 39-26-707.1) draws the line with examples:
- Nonessential → taxable: "serving trays, platters, and dome lid covers to plates or platters."
- Essential → exempt: "plates … and lids … on, or in which, unwrapped or unpackaged … prepared food … are served to the consumer," when "the retailer cannot transfer the food to the consumer without such article or container."

So the question for any given item is simply: can the retailer transfer the food to the customer without it? If yes, the item is nonessential and taxable; if no, it's essential and exempt. The Department lays out that test and the examples but does not formally rule on this restaurant's specific trays and lids.

What this means for you

Restaurants, caterers, and quick-serve operators

For each disposable item you give customers with food, ask whether the food literally can't be handed over without it. A plate or lid that holds unwrapped prepared food (so it can be served at all) leans exempt; a serving tray, platter, or decorative dome lid that's there for presentation or convenience leans taxable — the regulation names those as nonessential examples. Two more conditions for the exemption: you must give the item to the customer for free (no separate charge) and ownership must pass to them. If you charge separately for an item, that's its own retail sale.

Accountants and tax professionals

This is the food-vendor container/article exemption (§ 39-26-104(1)(c),(d)) as fleshed out by Reg. 39-26-707.1 — note it's distinct from the resale and ingredient exemptions. Because this is a GIL with no determination, treat it as the framework, not an answer, and consider a private letter ruling for a binding result on specific items.

Common questions

Q: Does a restaurant pay tax on the to-go containers it buys?
A: Containers given free to the customer are exempt only if essential — i.e., the food can't be transferred without them and ownership passes to the customer. Convenience items (serving trays, platters, dome lids) are taxable. The restaurant pays tax when it buys the taxable ones.

Q: Are platters and serving trays taxable?
A: The regulation lists "serving trays, platters, and dome lid covers" as nonessential examples, which makes them taxable. Plates and lids that are necessary to serve unwrapped prepared food can be exempt.

Q: What's the actual test?
A: Whether "the retailer cannot transfer the food to the consumer without" the item. If it's necessary to transfer the food, it's essential (exempt); if it's for convenience, it's nonessential (taxable).

Q: Does this letter decide my case?
A: No. A General Information Letter is general guidance and is not binding on the Department; it makes no specific determination. For a binding answer on your items, request a private letter ruling.

Q: Does this cover city sales tax?
A: No. The Department administers state and state-collected local taxes only; self-collected home-rule cities set their own rules — check with each.

Citations and references

Statutes and rules:
- § 39-26-104(1)(a), C.R.S. (sales tax on retail sales of tangible personal property)
- § 39-26-104(1)(c) and (d), C.R.S. (food-vendor article/bag/container exemption; not for nonessential items)
- 1 CCR 201-4, Reg. 39-26-707.1 (essential vs nonessential articles and containers; examples)

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-18-013.pdf

Original ruling text

Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]

GIL-18-013
November 28, 2018
XXXXXX
Attn: XXXXXX
XXXXXX
XXXXXX
Re: Sales tax on food platters and lids
Dear XXXXXX,
You submitted a request for guidance regarding the applicability of sales tax to
platters and lids used by a quick serve restaurant (“Company”).
The Colorado Department of Revenue (“Department”) issues general information
letters and private letter rulings. A general information letter provides a general
overview of the relevant tax issues, but is not binding on the Department. A private
letter ruling provides a specific determination for a specific set of facts, is binding
on the Department but not on the taxpayer, and requires payment of a fee. For
more information about general information letters and private letter rulings, please
see Department Rule 1 CCR 201-1, 24-35-103.5.
The Department treats this request as a general information letter. It is important
to remember that general information letters, such as this one, are general
discussions of tax law and are not binding on the Department. If Company would
like the Department to issue a private letter ruling on the issue raised here,
Company can submit a request and pay the fee in compliance with Department
Rule 1 CCR 201-1, 24-35-103.5.
Issues
Does sales tax apply to a restaurant’s purchase of catering trays and lids that are
used by a restaurant to provide sandwich platters to customers?
Background
Company sells sandwich platters. These sandwich platters contain either 15 or 30
pieces of unwrapped, prepared sub sandwiches.

Discussion
In general, Colorado imposes sales tax on retail sales of tangible personal
property.1 A sales tax exemption applies to any article, bag, or container furnished
by a food vendor to the consumer if ownership and possession of the article, bag,
or container passes to the consumer and the food vendor does not separately
charge the consumer for the article, bag, or container.2 However, the exemption
does not apply to any article, bag, or container that is not essential to the food
sale.3
The applicable regulation provides clarification that an article or container is
nonessential and therefore taxable “if it is primarily used for the convenience of the
consumer and is not necessary to transfer the food to the consumer.”4 Among the
examples of nonessential articles and containers, the regulation lists “serving trays,
platters, and dome lid covers to plates or platters.”5
By contrast, “[d]isposable containers or packaging material on, or in which, food is
transferred to the consumer” are exempt “if the retailer cannot transfer the food to
the consumer without such article or container.”6 The regulation includes as
examples of exempt items “plates...and lids...on, or in which, unwrapped or
unpackaged...prepared food...are served to the consumer.”7
Whether a tray, platter, plate, or lid purchased by a food vendor and furnished to a
consumer is exempt from taxation depends on whether the tray, platter, plate, or lid
is “necessary to transfer the food to the consumer” and whether “the retailer cannot
transfer the food to the consumer without” it. If an article is “not necessary to
transfer the food to the consumer,” the article is nonessential and subject to
taxation. If “the retailer cannot transfer the food to the consumer without” the
article, it is exempt from taxation.
Miscellaneous
This letter represents the good faith opinion of Department personnel who are
knowledgeable on state taxes issues. However, the Department does not make a
specific determination on any of the issues raised and the Department is not bound
by this general information letter.
The Department administers state and state-administered local sales and use
taxes. This letter does not address sales and use taxes administered by home-rule
cities and home-rule counties. You may wish to consult with local governments,
which administer their own sales or use taxes about the applicability of those
taxes. Visit our web site at www.colorado.gov/tax for more information about state
and local sales taxes.
1 § 39-26-104(1)(a), C.R.S.

2 § 39-26-104(1)(c) and (d), C.R.S.
3 § 39-26-104(1)(c) and (d), C.R.S.

4 Reg. 39-26-707.1(1)(a), 1 CCR 201-4.

5 Reg. 39-26-707.1(1)(a)(i), 1 CCR 201-4.

6 Reg. 39-26-707.1(1)(a)(ii), 1 CCR 201-4.

7 Reg. 39-26-707.1(1)(a)(ii), 1 CCR 201-4.

2

DR 4010A (06/11/14)

Enclosed is a redacted version of this letter. Pursuant to statute and regulation,
this redacted letter will be made public within 60 days of the date of this
letter. Please let me know in writing within that 60 day period whether you have
any suggestions or concerns about this redacted letter.
Sincerely,

Office of Tax Policy
Colorado Department of Revenue

3

DR 4010A (06/11/14)