My catering company and a commonly-owned event-rental affiliate often work the same events for the same clients but bill separately -- can the affiliate keep using resale certificates with its vendors even though we're related companies?

Plain-English summary

Classe Catering, LTD is a full-service catering company. Its affiliate, "Company A," provides customers with special-event items like tents, flowers, and entertainment. Classe and Company A are commonly owned but are separate legal entities with separate books, separate income tax returns, and separate sales tax registrations; they often work the same events for the same underlying customer, but each customer contracts separately with whichever of the two they use, and each company is free to work with customers who don't use the other. Company A charges sales tax on its billings to customers unless it gets a resale or exemption certificate, and gives its own vendors (florists, tent companies, entertainers) resale certificates so it can buy those items tax-free for resale. Classe asked whether it's proper for Company A to keep giving its vendors resale certificates given how closely intertwined the two businesses are.

The Department said yes, Company A can continue using resale certificates — but walked through the underlying rules carefully. As a caterer, Classe itself must pay sales tax on anything it buys and uses (rather than resells) to perform its catering services — tables, tents, chairs, linens, and similar items a caterer consumes providing the service are taxable to the caterer under the regulations, not eligible for resale treatment. So to the extent Classe uses Company A's property or services in providing its own catering, Classe must pay tax on those purchases from Company A, and must then collect tax from its own customers on its total catering charge — including whatever it paid Company A for those items (citing Matter of Elegant Affairs, Inc.).

But that's different from Company A separately contracting with the shared customer for its own distinct services (event rentals, entertainment) at the same event. The key legal question there is whether Classe and Company A are truly separate entities, or whether one is really just the "alter ego" of the other (in which case their separate-entity status could be disregarded for tax purposes). The Department applies a multi-factor test — common officers/directors/offices, degree of personnel overlap, business discretion, independent operation, and whether the companies hold themselves out publicly as separate businesses. Here, despite common ownership, the two companies keep separate books and registrations, contract independently with customers, and aren't required to work together — so the Department found they're genuinely separate entities, not alter egos. Company A, as a genuine independent vendor, may buy inventory (flowers, tents, entertainment services) tax-free for resale using a proper Form ST-120 resale certificate with its own vendors, and must collect and remit sales tax on its own separate billings to the shared customer.

The opinion flags one important caveat: this whole analysis assumes Company A really is operating as a separate business — if the facts showed Company A's activities were so dominated, controlled, or commingled with Classe's that they were really operating as each other's alter ego, the corporate separateness would be disregarded and the conclusion would flip.

What this means for you

Commonly-owned businesses working the same clients/events

Common ownership alone doesn't collapse two companies into one taxpayer for sales tax purposes. If each entity keeps separate books, separate registrations, contracts independently with customers, and can do business without the other, each can be treated as its own vendor — including using its own resale certificates with its own vendors — even when they frequently serve the same customer at the same event.

Caterers using an affiliate's equipment or services

Don't assume you can treat an affiliate's tents, linens, or entertainment as a straight pass-through purchase for resale. If you're the caterer using that property/service to perform your own catering, you owe tax on your purchase from the affiliate and must include that cost in your fully-taxed catering receipts — you can't route around the "self-use" tax on caterer supplies just by buying through a related company.

Accountants and tax professionals

The alter-ego factors listed here (common officers/directors/offices, personnel overlap, business discretion, independent operation, separate public-facing identities) are the Department's standard multi-factor test, cited from three 1986 opinions (Harfred, Spencer Gifts, Levitz Furniture) — a durable checklist whenever a client structures related businesses that share customers or venues.

Common questions

Q: Can my company's affiliate keep using resale certificates if we're commonly owned and often work the same events?
A: Yes, as long as the two companies are genuinely operated as separate businesses (separate books, registrations, and customer contracts, with real business discretion) rather than as one entity's alter ego.

Q: If I'm a caterer and I use my affiliate's tents and linens for an event, do I owe tax on that purchase?
A: Yes. A caterer's purchases of equipment/supplies it uses (rather than resells) to perform catering services are taxable to the caterer, regardless of whether they're bought from an affiliate, and the cost must be included in the caterer's fully-taxed catering charge to its customer.

Q: What factors does the Department look at to decide if two related companies are really "alter egos" of each other?
A: Common officers/directors/offices and phone numbers, degree of personnel overlap, the amount of independent business discretion each company exercises, whether they operate independently, ownership structure, and whether each holds itself out publicly as a separate, distinct business.

Q: Does this ruling apply to my related-company arrangement?
A: Not automatically. This is an Advisory Opinion binding only on Classe Catering, LTD and only as to the facts it described. Whether your affiliated companies are "separate" enough for this treatment depends heavily on your specific corporate formalities and operations.

Citations and references

Statutes and regulations:

• Tax Law §1101(b)(4) (definition of "retail sale")
• Tax Law §1105(d)(i) (tax on food and drink sold by restaurants/caterers)
• Tax Law §1132(c)(1) (resale/exemption certificate; presumption of taxability)
• Sales and Use Tax Regulations §527.8(f)(2)(i) (caterer's self-use of equipment/supplies is taxable)

Cases and prior opinions referenced:

• Matter of Elegant Affairs, Inc., Det. Tax App. Trib., March 13, 2008, DTA Nos. 820599, 820600, 820601
• Harfred Operating Corporation, TSB-A-86(28)S
• Spencer Gifts, Inc., TSB-A-86(37)S
• Levitz Furniture Co. of the Eastern Region, Inc., TSB-A-86(38)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2008.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a08_51s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Taxpayer Guidance Division

TSB-A-08(51)S
Sales Tax
December 15, 2008

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S060810A

On August 10, 2006, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Classe Catering, LTD, 2 Petra Lane, Albany, New York 12205.
Petitioner, Classe Catering, LTD, provided additional information pertaining to the Petition on
October 16, 2006.
The issue raised by Petitioner is whether it is proper for Petitioner’s affiliate, Company
A, to provide its vendors with a resale certificate when, as described below, Petitioner and
Company A have the same customer and are working at the same event.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner is a full service catering company. Petitioner’s affiliate, Company A, provides
individuals and companies with various special event items such as tents, flowers, entertainment,
etc.
Petitioner and Company A often have the same customers and work the same events.
Customers may separately contract with Petitioner and Company A. Petitioner and Company A
are each free to contract with customers who do not contract with the other. Customers are billed
separately by Petitioner and Company A for their respective services. Company A charges the
sales tax due on all its sales unless it receives a properly executed resale or exempt certificate.
Company A provides its vendors with resale certificates for items such as flowers, tents,
entertainment, etc., and charges sales tax on its bills to its customers.
Petitioner and Company A have the same ownership but are separate legal entities that
maintain separate books and records and file separate income tax returns and have separate sales
tax registrations.
Applicable law and regulations
Section 1101(b)(4) of the Tax Law provides, in part:
Retail sale. (i) A sale of tangible personal property to any person for any purpose,
other than (A) for resale as such or as a physical component part of tangible personal
property, or (B) for use by that person in performing the services subject to tax under
paragraphs (1), (2), (3), (5), (7) and (8) of subdivision (c) of section eleven hundred five
where the property so sold becomes a physical component part of the property upon
which the services are performed or where the property so sold is later actually

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transferred to the purchaser of the service in conjunction with the performance of the
service subject to tax….
Section 1105(d)(i) of the Tax Law provides, in part:
The receipts from every sale of beer, wine or other alcoholic beverages or any
other drink of any nature, or from every sale of food and drink of any nature or of food
alone, when sold in or by restaurants, taverns or other establishments in this state, or by
caterers, including in the amount of such receipts any cover, minimum, entertainment or
other charge made to patrons or customers (except those receipts taxed pursuant to
subdivision (f) of this section):
(1) in all instances where the sale is for consumption on the premises where sold;
(2) in those instances where the vendor or any person whose services are arranged
for by the vendor, after the delivery of the food or drink by or on behalf of the vendor for
consumption off the premises of the vendor, serves or assists in serving, cooks, heats or
provides other services with respect to the food or drink; . . .
Section 1132(c)(1) of the Tax Law provides, in part:
For the purpose of the proper administration of this article and to prevent evasion
of the tax hereby imposed, it shall be presumed that all receipts for property or services of
any type mentioned in subdivisions (a), (b), (c) and (d) of section eleven hundred five, all
rents for occupancy of the type mentioned in subdivision (e) of said section, and all
amusement charges of any type mentioned in subdivision (f) of said section, are subject
to tax until the contrary is established, and the burden of proving that any receipt,
amusement charge or rent is not taxable hereunder shall be upon the person required to
collect tax or the customer. Except as provided in subdivision (h) or (k) of this section,
unless (i) a vendor, not later than ninety days after delivery of the property or the
rendition of the service, shall have taken from the purchaser a resale or exemption
certificate in such form as the commissioner may prescribe . . . the sale shall be deemed a
taxable sale at retail….
Section 527.8 (f)(2)(i) of the Sales and Use Tax Regulations provides:
Self-use. Taxable tangible personal property or services used or consumed by a
caterer in performing catering services are not purchased for resale as such and are
subject to tax. Examples of such taxable property are: tables, tents, chairs, bars, linens,
napkins, silverware, glassware, chinaware, serving utensils, table covers, ice used to chill
food or drinks before serving, as well as floral arrangements not purchased in accordance
with the conditions set forth in subparagraph (v) of this paragraph.

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Opinion
Petitioner is a full service catering company. As a caterer, Petitioner is subject to tax on
its purchases for use in providing catering services and must collect sales tax on its sales of such
service under section 1105(d) of the Tax Law. See section 527.8(f)(2) of the Sales and Use Tax
Regulations.
Thus, to the extent that Petitioner, in providing catering services to a customer, utilizes
the services or property of Company A in the provision of such catering services to customers,
Petitioner would be required to pay sales tax on its purchases from Company A. Petitioner must
collect tax from its customers on its total receipts for the sale of its catering services (including
the charges for property or services provided to Petitioner by Company A). See Matter of
Elegant Affairs, Inc., Det Tax App Trib, March 13, 2008, DTA Nos. 820599, 820600, 820601.
Petitioner and Company A are related companies. The status of related companies as
separate entities may be disregarded in situations where one company so dominates and controls
the affairs of the other that one is merely an instrumentality of the other. In such situations, an
entity may be considered to be the alter ego of the related company. Indicia such as common
officers and directors, common offices and common telephone numbers between corporate
entities are relevant though not necessarily sufficient by themselves to show that one entity is the
alter ego of another. Consideration is also given to factors such as the degree of overlap of
personnel, the amount of business discretion displayed by the individual companies, whether the
entities operate independently of each other, or whether one owns all or most of the stock (or
other interest in) the other. Also significant is whether the entities trade under their own names
and whether they hold themselves out to the public as separate and distinct businesses. See
Harfred Operating Corporation, Adv Op St Tx Comm, July 18, 1986, TSB-A-86(28)S; Spencer
Gifts, Inc., Adv Op St Tx Comm, September 18, 1986, TSB-A-86(37)S; Levitz Furniture Co. of
the Eastern Region, Inc., Adv Op St Tx Comm, September 18, 1986, TSB-A-86(38)S. Petitioner
and Company A have the same ownership but maintain separate books and records, file separate
income tax returns and have separate sales tax registrations. Though Petitioner and Company A
often have the same customers and work the same events, customers may separately contract
with Petitioner and Company A. Similarly, Petitioner and Company A are each free to
separately contract with customers who do not contract with the other company. It would
appear, therefore, based on the facts provided in this Opinion, that Petitioner and Company A are
separate entities and that one is not the alter ego of the other.
The Tax Appeals Tribunal in its decision in Matter of Elegant Affairs, Inc., supra,
specifically noted the lack of any evidence that the petitioner was engaged in a separate business
of renting equipment except as a component of its catering business. Company A, by contrast,
does not sell food, is not a caterer as contemplated by section 1105(d)(i)(2) of the Tax Law, and
does not bill its customers for catering services. It appears from the facts in this Opinion that
Company A is in a separate business of selling services such as entertainment and selling or
renting tangible personal property such as tents, flowers, and other items. Where both Petitioner

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and Company A are providing services at the same event, Company A’s charges to its customers
for its property and services are separate, distinct and independent of Petitioner's charges to the
customer for catering services. When Company A bills its customers for items that are subject to
sales tax, it must collect the sales tax from its customer. As a vendor of taxable goods or
services, Company A may make purchases of tangible personal property or taxable services
exclusively for resale without payment of sales tax. See section 1101(b)(4)(i) of the Tax Law.
Company A should provide its vendors with a properly completed Resale Certificate (Form ST­
120) in order to relieve those vendors of their obligation to collect sales tax on their sales to
Company A. See section 1132(c)(1) of the Tax Law.
The above analysis presumes treatment of Company A as a separate legal entity.
However, if the activities of Company A were so dominated and controlled by Petitioner or their
activities were so commingled that they would be considered to be operating as alter egos of
each other rather than separate legal entities, then the corporate structures would be disregarded
and the conclusions reached in this Opinion would not apply. See Harfred Operating
Corporation, supra.

DATED: December 15, 2008

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Taxpayer Guidance Division

An Advisory Opinion is issued at the request of a person or entity.
It is limited to the facts set forth therein and is binding on the Department
only with respect to the person or entity to whom it is issued and only if
the person or entity fully and accurately describes all relevant facts. An
Advisory Opinion is based on the law, regulations, and Department
policies in effect as of the date the Opinion is issued or for the specific
time period at issue in the Opinion.