If an event organizer charges a cancellation fee for a canceled event that would have included a hotel banquet hall and catered food, is that fee subject to Colorado sales or use tax?

Plain-English summary

Someone asked the Colorado Department of Revenue whether a cancellation fee is taxable when a customer books an event — a hotel banquet hall plus food-and-beverage catering — and then cancels it. The Department's answer: no, the cancellation fee is not subject to Colorado state or state-administered local sales or use tax.

The reasoning is simple. Colorado taxes retail sales of tangible personal property plus a specific list of commodities and services. Catered food and drink "served or furnished" by hotels and caterers is on that taxable list. But the mere use of a banquet or meeting room is treated as a service that is not taxed — a Department rule says rooms "used exclusively for a banquet, meeting, or sales/display [are] not subject to Colorado sales tax."

When the event is canceled, the organizer collects a fee to recoup costs but no food or drink is actually served or furnished, and the banquet-hall use wasn't taxable to begin with. So nothing taxable happens — there's no retail sale of property, commodity, or service — and the cancellation fee falls outside the tax.

Because this is a General Information Letter, it is general guidance the Department is not bound by, not a binding ruling for one taxpayer.

What this means for you

Event organizers, hotels, and caterers

If you charge a cancellation fee when a customer cancels a banquet/catering booking, you generally should not charge Colorado state sales or use tax on that fee — because at that point you haven't served any food or drink, and room use isn't taxable. The key is that the fee is a charge for a canceled event, not a charge for food, drink, or property that actually changed hands. If your "cancellation" charge is structured differently (for example, it covers food already prepared and delivered), the analysis could change.

Accountants and bookkeepers

The fee isn't taxable because no taxable transaction occurs: no § 39-26-104(1)(e), C.R.S. food/drink is "served or furnished," and banquet-room use is non-taxable under 1 CCR 201-5, Special Rule 22. Remember this is a GIL — persuasive guidance on the Department's thinking, but not binding on the Department and not a determination for any specific taxpayer.

Common questions

Q: Is a cancellation fee for a canceled catered event taxable in Colorado?
A: No. The Department's view is that no taxable sale occurs — no food or drink is served, and banquet-room use isn't subject to sales tax — so the fee is not subject to state or state-administered local sales or use tax.

Q: Why isn't it taxed like the catering would have been?
A: Because the catering never happened. The tax applies to food or drink that is actually served or furnished; a fee for a canceled event isn't payment for any food, drink, property, or taxable service.

Q: Can I rely on this for my business?
A: Treat it as guidance, not a guarantee. A General Information Letter is not binding on the Department and makes no determination for any specific taxpayer; it reflects the good-faith opinion of Department staff on the general issue.

Q: Does this cover city taxes?
A: No. The Department administers state and state-administered local sales and use taxes only. Self-collected home-rule cities set their own rules, so check with each city.

Citations and references

Statutes and rules:
- § 39-26-104(1), C.R.S. (sales/use tax on retail sales of tangible personal property and enumerated commodities and services)
- § 39-26-104(1)(e), C.R.S. (food or drink served or furnished by restaurants, hotels, caterers, and similar businesses is taxable)
- 1 CCR 201-5, Special Rule 22 (charges for banquet and meeting rooms used exclusively for a banquet, meeting, or sales/display are not subject to Colorado sales tax)
- 1 CCR 201-1, Rule 24-35-103.5 (general information letter and private letter ruling procedure)

Source

• Landing page: Colorado Sales & Use Tax Letter Rulings
• Original PDF: GIL-25-003.pdf

Original ruling text

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

GIL 25-003
March 24, 2025
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
Via Electronic Mail: XXXXXXXXX
Re: Event Cancellation Fee
Dear XXXXXXXXX:
You submitted a request for a general information letter regarding the taxability of cancellation
fees with respect to catered food and the use of a banquet hall. 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, and requires payment of a fee. For more information about general
information letters and private letter rulings, please see 1 CCR 201-1, Rule 24-35-103.5.
Issue
Whether an event cancellation fee imposed for the cancellation of an event that included the
use of a hotel banquet hall and food and beverage catering is subject to Colorado state and
state-administered local sales and use tax.
Discussion
Colorado imposes a sales and use tax on retail sales of tangible personal property, as well as
certain enumerated commodities and services.1 The sale of “food or drink served or furnished in
or by restaurants, cafes, lunch counters . . . hotels, . . . resorts, . . . caterers, . . . and other like
places of business at which prepared food or drink is regularly sold” is one of the enumerated
commodities subject to sales and use tax.2 The use of a banquet room for an event is generally
considered a service and is not among the services explicitly subject to sales tax in Colorado.3
1 CCR 201-5, Special Rule 22 sets forth that charges for banquet and meeting rooms “used
exclusively for a banquet, meeting, or sales/display [are] not subject to Colorado sales tax.”4

1

Section 39-26-104(1), C.R.S.
Section 39-26-104(1)(e), C.R.S.
3
1 CCR 201-5, Special Rule 22
4
1 CCR 201-5, Special Rule 22
2

GIL 25-003
March 24, 2025
Page 2
Generally, an event cancellation fee is a charge that an event organizer will impose if an event
is canceled after a contract is executed but before the event is scheduled to take place. An
event cancellation fee is imposed by the event organizer to recoup some of the costs incurred
when an event is canceled.
When an event organizer imposes an event cancellation fee, it is not making a retail sale of
tangible personal property, commodity, or service. Specifically, the event organizer is not
serving or furnishing any food or drink when an event is cancelled. Because no food or drink is
being served or furnished, and the use of a banquet hall is not subject to sales tax, no taxable
event occurs. As a result, an event cancellation fee for the cancellation of an event that included
the use of a banquet hall and food and beverage catering is not subject to sales or use tax.
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 self-collected home-rule cities. You may
wish to consult with those local governments that administer their own sales or use taxes about
the applicability of those taxes. Visit our website at Tax.Colorado.gov for more information about
state and local sales taxes.
Thank you for your request.
Sincerely,
Office of Tax Policy
Colorado Department of Revenue