Is a food producer's sale of branded food to a stadium concessioner taxable when related companies serve and oversee that food?

Plain-English summary

The petitioner is part of a well-known New York City restaurant group. It was formed to produce branded specialty foods (spare ribs, pulled pork, wings, tacos, sauces) for sports venues. It makes and packages the food, delivers it unheated to a Stadium, and performs no services there itself. The food is sold to a Concessioner that prepares and serves it, but related entities in the restaurant group (1) station employees at the Stadium to oversee how the branded food is served, and (2) under the parent's contract with the Concessioner, even have a say in training and selecting the Concessioner's serving employees. The petitioner asked whether its sales of the food are taxable.

The Office of Counsel concluded the sales are taxable. Tax Law 1105(d)(i)(2) imposes sales tax on food where "the vendor or any person whose services are arranged for by the vendor," after delivery for off-premises consumption, serves, assists in serving, cooks, heats, or provides other services with respect to the food. The general food exemption (1115(a)(1)) does not apply to 1105(d). Although the petitioner only delivers the food, the related entities provide services with respect to it at the Stadium -- and the parent's contract effectively arranges for those services. So state and local sales tax must be collected and remitted on the petitioner's charges for the prepared food.

Who remits, and the concessioner's credit:
- Because the petitioner invoices the Concessioner but the parent entity collects the receipts on the petitioner's behalf, both are jointly and severally liable (1101(b)(8)(ii)(A)); as the entity that receives the receipts, the parent should register and remit.
- The Concessioner may take a credit on its own sales tax return for the tax it paid on the food, against the tax it collects when it resells the food to patrons (20 NYCRR 527.8(i)).
- Separately, charges by the related entities for serving/overseeing the food at the Stadium are themselves taxable caterer charges (20 NYCRR 527.8(f)(1)(i)).

What this means for you

Multi-entity restaurant and catering groups

You can't sidestep the catering tax by splitting functions across affiliates -- one company cooks and delivers, another serves. If any related (or arranged-for) entity provides services with respect to the food after delivery, the producer's sale is taxed under 1105(d) as if it were catering. Map which affiliate collects the money -- that's typically the one that must register and remit, and everyone in the chain who handles the tax is jointly liable.

Concessioners and resellers buying prepared food

If you pay tax to a supplier on food you then resell to the public, claim the resale credit (527.8(i)) so the same food isn't taxed twice.

Common questions

Q: The producer never touched the food at the venue -- why is it taxed like catering?
A: Because related entities it's grouped with provided serving/oversight services with respect to that food, and the parent's contract arranged for them -- 1105(d)(i)(2) reaches services by "any person whose services are arranged for by the vendor."

Q: Who registers and pays?
A: The parent entity that collects the receipts should register and remit; it and the producer are jointly and severally liable.

Q: Does the concessioner pay tax twice?
A: No -- it credits the tax it paid the group against the tax it collects on its resale to patrons.

Citations and references

• Tax Law section 1105(a) (sales tax on tangible personal property)
• Tax Law section 1105(d)(i)(2) (tax on food where vendor or arranged-for person provides services)
• Tax Law section 1115(a)(1) (food exemption; not applicable to 1105(d))
• Tax Law section 1101(b)(8)(ii)(A) (joint and several liability of persons collecting tax)
• 20 NYCRR section 527.8(i) (credit for tax paid on resold food)
• 20 NYCRR section 527.8(f)(1)(i) (caterer service charges taxable)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2010.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a10_12s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-10(12)S
Sales Tax
April 5, 2010

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S090825C

Petitioner, name and address redacted asks whether the sales of the food that it produces for a related
entity and that is sold to a Concessioner at a major sport facility (Stadium) are subject to tax.
We conclude that Petitioner’s parent entity must collect and remit tax on its sales of food and
services related to that food, notwithstanding that Petitioner delivers the food in an unheated state to the
Stadium where it is consumed, because other entities related to Petitioner provide services with respect to the
food at the Stadium on Petitioner’s behalf. The unrelated Concessioner who purchases the food from the
Petitioner may take a credit on its sales and use tax return for the amount of the tax it paid to Petitioner’s
parent entity against the amount of tax it collects on its sales of that food to its customers.
Facts
Petitioner presented the following statement of facts: Petitioner was formed as part of a larger group
of related restaurant entities (Restaurant Group) that are well known in New York City for the quality of their
food products and services. In particular, Petitioner was formed to provide food products to sports facilities
and other large-scale entertainment venues. Related entities provide catering and food management services.
Petitioner and its related entities attempt to recreate the cuisine and eating experience offered at the
restaurants that make up the larger Restaurant Group. The parent entity of the Restaurant Group is
responsible for catering off-premises events ranging from small, elegant dinner parties to corporate events
serving 1500 people, to wedding receptions. Petitioner only produces and delivers the food to the sporting
facilities, while a related entity provides employees who perform certain management services overseeing
the overall service of the food at the Stadium. Such management services are necessary to ensure that the
food produced by Petitioner is served in the concession areas in a manner consistent with the standards
maintained by the overall Restaurant Group.
The parent entity of the Restaurant Group has a contract to provide food and management services
with the Concessioner at the Stadium:
“[The Parent Entity] shall obtain the products required for the preparation of the Approved
Menu Items and Premium Menu Items from [the Concessioner’s ] customary suppliers assuming
such products meet or exceed [the Parent Entity’s] product specifications as identified in the Budget
and are consistent with Standards. If any such products are not available from [the Concessioner’s]
customary suppliers, [the Concessioner and the Parent Entity] shall work closely together and obtain
such products from [one of the] specialty vendors [i.e., from the larger Restaurant Group].”
The contract also has provisions that allow the facilities run by the Concessioner at the Stadium to
use the names of the restaurant facilities belonging to the entities of the Restaurant Group. Because the food
provided at the Stadium is identifiable to the overall Restaurant Group, the contract places emphasis on
maintaining the branded food’s standards. While the food is prepared and served at the Stadium by
Concessioner’s employees, employees of one of the related restaurant entities are present at the Stadium to
monitor the service of the food by the Concessioner’s employees. The reputation of its food is of such

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Sales Tax
April 5, 2010

concern to the Restaurant Group that the contract between the Concessioner and the Restaurant Group allows
a related restaurant entity from the Restaurant Group to have a say in the training and selection of the
Concessioner’s employees.
Petitioner’s role within the Restaurant Group is to be “specialty vendor” as required by contract. The
food items made in its kitchen could not be purchased from another vendor, since they are the type of foods
that are identified, by brand name, as originating with the entities of the Restaurant Group. Ninety percent of
Petitioner’s business is producing these distinctive branded specialty foods from raw ingredients. These
include: spare ribs, pulled pork, chicken wings, hamburgers, tacos, French fries, salsas, and various sauces.
Petitioner rubs or marinates the ingredients, cooks, cools and then prepares and packages the finished food
products for delivery to the Stadium. The food is unheated when sent to the Stadium, and the Petitioner itself
provides no services at the Stadium after it delivers the food. After delivery to the Stadium, additional
preparation of the food may be required. For example, the prepared wings need to be deep-fried by the
Concessioner. Employees of other entities of the Restaurant Group provide services related to food at the
Stadium. Even though the food products are sold at the Stadium by the Concessioner, the food products are
identifiable by brand as originating with either Petitioner or a related entity, and are in many instances sold at
eating locations at the Stadium that use the name of an entity of the larger Restaurant Group.
Petitioner produces food at a kitchen facility shared with a related catering entity. Petitioner’s
stadium contract is a seasonal busines, but the same or very similar food is produced year round at this
facility by the related catering entity. In the off season, the cooks that work for Petitioner work for one of
the related entities of the Restaurant Group, while the stand managers located at the Stadium (who work for a
related entity) are laid off until the next season.
The Concessioner signed one contract with the parent entity of the Restaurant Group; it did not want
to enter into separate contracts with each of the subsidiaries of the Restaurant Group. The charges for the
food produced by Petitioner are invoiced directly to the Concessioner by Petitioner, and are separate and
apart from the invoices for other charges (such as for the services of the related entities’ employees).
Although the invoice is provided to the Concessioner by Petitioner, payment is made by the Concessioner to
the parent entity. The parent entity then redistributes the amounts paid within the corporate group, including
payment for the cost of the food sold by Petitioner.
Every item sold by Petitioner under the contract requires some amount of preparation by Petitioner
before the items are delivered to the Stadium. Petitioner does not provide any items to the Concessioner in
the same form in which it received them.
Analysis
Section 1105(a) of the Tax Law imposes a sales tax on the receipts from every “retail sale” of
tangible personal property, except as otherwise provided in the Tax Law. Tax Law section 1115(a)(1)
exempts receipts from the sale of “food, food products, and beverages” sold for human consumption. But that
section does not exempt the sale of any food or drink from the tax imposed by section 1105(d) of the Tax
Law. Tax Law section 1105(d)(i)(2) imposes sales tax on every sale of food and drink, or of food alone,
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.”
While Petitioner does not itself provide any services at the Stadium beyond the delivery of the food,
services with respect to the food are provided by employees of entities related to Petitioner. The Restaurant

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Sales Tax
April 5, 2010

Group is concerned with the way the food is served at the Stadium, because the foods (and the locations at
which the food is served) are identifiable with the entities in the Restaurant Group. The employees of the
related entities oversee the way the food is served at the Stadium. In addition, under the contract between the
Concessioner and the parent entity, a related entity in the Restaurant Group has a say in the training and
selection of the Concessioner’s employees who prepare and serve Petitioner’s food. Moreover, the contract
between the Concessioner and the parent entity, in effect, arranges for the parent entity and others in the
Restaurant Group to provide services with respect to the food provided by Petitioner. Thus, because
Petitioner is providing prepared food to the Concessioner in conjunction with its parent entity’s contract with
the Concessioner, and employees of the entities related to Petitioner are providing services with respect to
that food at the Stadium under section 1105(d)(i)(2), State and local sales taxes must be collected and
remitted on the charges for the prepared food Petitioner provided to the Concessioner.
The nature of the relationship between Petitioner and its parent entity with regard to the billing for
the products sold by Petitioner and the remuneration provided by the Concessioner is unclear in the Petition.
However, because Petitioner submits the invoice to the Concessioner and the parent entity initially collects
the receipts on behalf of Petitioner, both entities are jointly and severally liable for the payment of the tax to
the Department (see § 1101(b)(8)(ii)(A) of the Tax Law). As the entity that receives the tax receipt for the
Concessioner, the parent entity appears to be the entity that should register and remit tax.
The Concessioner may apply for a credit in the amount of the tax it pays to the parent entity on its
purchase of food products from Petitioner against the tax it collected on its sales of that food at the Stadium
and that it reports on its sales tax returns. See section 527.8(i) of the Sales and Use Tax Regulations; Billmar
Amusements NY Party Works, Inc., (TSB-A-07(2)S).
The issue of the tax treatment of the services provided by the related entities at the Stadium was not
raised in the Petition. However, it must be noted that section 527.8(f)(1)(i) of the sales and use tax
regulations requires that all charges by caterers selling food or drink who provide serving or assistance in
serving, cooking, heating, or other services after delivery are subject to State and local sales taxes at the rate
in effect where the food and services are delivered. This would include charges by the parent entity on
behalf of itself or a related entity for the services of the employees of the Restaurant Group who monitor or
otherwise assist in the delivery of the food at the Stadium. As is the case for the charges for the food, the
Concessioner would be allowed to take a credit for the tax paid on such services on its own sales and use tax
return.

DATED: April 5, 2010

NOTE:

/S/
Jonathan Pessen
Director of Advisory Opinions
Office of Counsel
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.