Does an events venue have to charge sales tax on its site fee, and on the amounts it exchanges with its exclusive caterer?

Plain-English summary

A waterfront special-events venue rents its space with or without catering. If a customer wants catering, the venue requires them to use a single exclusive caterer (an unrelated business the customer contracts and pays directly). The venue asked three questions about sales tax: on its site fee, on its reimbursement of the caterer's operating costs, and on the profit the caterer pays over to it.

The Office of Counsel held:

• Site fee — depends on catering. New York taxes food and drink sold by restaurants/caterers "including… any cover, minimum, entertainment or other charge." When the venue is rented in conjunction with catering, the site fee is an "other charge" made in connection with the sale of food and drink, so it's taxable (TSB-A-03(20)S). When the venue is rented without catering, the site fee is not taxable (a bare facility rental, TSB-A-17(5)S). That the venue and caterer are unrelated doesn't change this, given the exclusive arrangement and cost reimbursement.
• Reimbursement of the caterer's food/beverage costs — taxable. Reimbursed costs, subsidies, and management fees for providing prepared food are taxable receipts from the sale of food and drink under § 1105(d)(i) (Prophet Foods; Stouffer).
• Profit paid by the caterer to the venue — not taxable. That profit share is not a receipt from the sale of food and drink, so it isn't subject to sales tax.

What this means for you

Event venues, banquet halls, and catering halls

If your space comes with catering (especially an exclusive caterer), expect your site/facility fee to be taxable as part of the food-and-drink charge. Renting the room alone, with the customer free to arrange their own food, keeps the rental non-taxable. How you structure money flows with your caterer matters: cost reimbursements you pay the caterer are taxable food receipts, while a profit share paid to you is not.

Caterers

Reimbursements/subsidies you receive for providing prepared food are taxable receipts — collect and remit accordingly.

Accountants and tax professionals

The hook is § 1105(d)(i) "other charge" for venue-with-catering (TSB-A-03(20)S) vs. bare rental (TSB-A-17(5)S); reimbursed food-service costs are taxable (Prophet Foods; Stouffer); a profit share to the venue is outside § 1105(d)(i).

Common questions

Q: Is our venue rental fee taxable?
A: It's taxable when the booking includes catering (it's an "other charge" on the food and drink), but not when the venue is rented without catering.

Q: We use an unrelated exclusive caterer — does that avoid the tax?
A: No. With an exclusive caterer and cost reimbursement, the site fee booked with catering is still taxable.

Q: Are the payments between us and the caterer taxable?
A: Your reimbursement of the caterer's food/beverage costs is taxable; the profit the caterer pays over to you is not.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law § 1105(d)(i) (food and drink sold by restaurants/caterers, including any cover, minimum, entertainment, or 'other charge')
• TSB-A-03(20)S (venue rented with catering = taxable 'other charge'); TSB-A-17(5)S (room rental alone not taxable)
• Petition of Prophet Foods Company, TSB-H-80(215)S; Stouffer Management Food Service v. Tully, 98 Misc.2d 1128 (Sup. Ct. 1978) (reimbursed food-service costs are taxable receipts)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales-ao-2020.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a20-51s.pdf

Original ruling text

New York State Department of Taxation and Finance
Office of Counsel

TSB-A-20(51)S
Sales Tax
October 27, 2020

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION
The Department of Taxation and Finance received a Petition for Advisory Opinion from
[ REDACTED ] (“Petitioner”). Petitioner asks whether it is required to charge sales tax to
customers on the site fee customers pay for use of its space as a special events venue. Petitioner
also asks whether tax is due on Petitioner’s reimbursement payment to Caterer for all direct
operating deficit costs and whether sales tax is due on Petitioner’s profit paid to Petitioner by
Caterer for food and beverage services. We conclude that, when the venue is rented along with
catering services, the site fee is subject to New York State sales and use tax because it constitutes
a charge made in conjunction with the sale of food and drink. When the venue is rented without
catering, the site fee is not subject to New York State sales and use tax. Additionally, we
conclude that the reimbursement to Caterer of costs related to food and beverage preparation are
taxable receipts from the sale of food and drink under Tax Law § 1105(d)(i), but the profit paid
to Petitioner by Caterer is not subject to tax.
Facts
Petitioner owns a special events venue in Suffolk County, N.Y. It offers facilities for
events and celebrations, including wedding receptions, private concerts, corporate forums, and
other occasions. The property showcases a waterfront lawn, a private marina, an indoor
ballroom, lounge, and views from the terrace.
The venue can be rented to customers with or without catering. Regardless of whether the
customer requests catering, the customer pays Petitioner a site fee to rent the venue. However, if
the customer would like to have the event catered, Petitioner requires that the customer contract
with a specified Caterer. The site fee is nonrefundable, and the Petitioner determines the amount
of the fee, depending on time of year and day of the week. Petitioner has a written agreement that
Caterer will be the designated and exclusive food and beverage service provider for Petitioner.
Caterer is a separate business entity from Petitioner with no related owners or officers. Caterer is
responsible for collecting and remitting sales tax on the catering services and for filing its own
sales tax returns. The customer negotiates and contracts separately with the Caterer, including
paying the Caterer directly and separately from Petitioner’s site fee.
The agreement between Petitioner and Caterer states that, each month, the Petitioner will
reimburse Caterer for:

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TSB-A-20(51)S
Sales Tax
October 27, 2020

All direct operating deficit costs including, but not limited to, payroll and benefits; food,
liquor, and supplies, linen, laundry, and uniforms, insurance; licenses and permits; bank
and credit card fees; phone, cable and related point-of-sale expenses; marketing material
and seasonal decorations; recruitment/want-ads; office supplies and computer processing
equipment; knife sharpening; smallwares; china and serviceware; repairs and
maintenance unless damage caused by Dining Service Provider [Caterer]; equipment
purchases, general and administrative costs; transition and start-up expenses, plus
applicable tax, payable each month.
In addition, the agreement provides that, if Caterer makes a profit, the profit will be paid to
Petitioner minus an agreed-upon fixed percentage. The agreed-upon percentage is the profit
amount kept by the Caterer.
Analysis
Petitioner first asks whether its site fee is subject to sales tax. Tax Law § 1105(d)(i)
imposes sales tax on 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.
If a venue is rented in conjunction with a catering service, the rental charge for the venue
constitutes an “other charge” made to the customer and the entire receipt, including the rental
charge, would be taxable. See TSB-A-03(20)S. However, a receipt for the rental of a room or
another of the club’s facilities would not, by itself, be subject to sales tax. See TSB-A-17(5)S.
When Petitioner rents its venue without catering, the site fee for that rental is not subject to sales
tax. However, when catering is provided, the site fee is taxable. Here, Caterer is the exclusive
provider of food and drink for events at Petitioner’s venue. In addition, the agreement between
Petitioner and Caterer states that Petitioner reimburses Caterer for the costs of providing its food
and beverage service for events at Petitioner’s venue. Under these circumstances, Petitioner’s
site fee is a charge for the use of the venue in conjunction with the sale of food and drink. It is
irrelevant to this conclusion that Petitioner and Caterer are unrelated entities. Therefore, the site
fee when charged in conjunction with catering is subject to sales tax under Tax Law § 1105(d)(i).
Petitioner also asks whether sales tax is due on Petitioner’s reimbursement of Caterer’s
costs relating to food and beverage service and, additionally, whether sales tax is due on the
profit minus an agreed-upon percentage paid to Petitioner by Caterer. Reimbursed costs,
subsidies and management fees for the provision of prepared food constitute taxable receipts for

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TSB-A-20(51)S
Sales Tax
October 27, 2020

the sale of food and drink within the meaning and intent of Tax Law § 1105(d)(i). See Petition
of Prophet Foods Company, TSB-H-80(215)S; see also, Stouffer Management Food Service, Inc.

v. Tully, 98 Misc.2d 1128, (Sup. Ct., N.Y. County, Nov. 15 1978). Therefore, Petitioner’s reimbursement
of Caterer’s costs relating to food and beverage service are taxable under Tax Law § 1105(d)(i). However,
profits paid to Petitioner by Caterer are not receipts from the sale of food and drink under Tax Law §
1105(d)(i) and are not subject to sales tax.

DATED: October 27, 2020

/S/
DEBORAH R. LIEBMAN
Deputy Counsel
NOTE:

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. The information provided
in this document does not cover every situation and is not intended to replace the
law or change its meaning.