Was an employer-paid desk coffee service taxable, and which disposable and reusable items could the provider buy tax-free?

Plain-English summary

The Texas Comptroller said the coffee-service provider had to collect tax from the employer on the total amount charged.

The employer provided the space and coffee-making equipment. The service furnished coffee, sugar, cream, cups, employees to prepare and serve it twice daily at employee desks, and billed 20 cents per cup for at least 672 cups regardless of how many were served.

The provider could buy nonreusable items furnished to employees with the coffee tax-free, including paper cups, paper napkins, and stir sticks. It had to pay tax on reusable items and taxable supplies used to provide the service.

What this means for you

Workplace coffee-service providers

The taxable customer charge was the full employer billing, not just the food or actual cups served.

Purchasing teams

The letter distinguished disposable items passed to employees from reusable equipment and other taxable supplies consumed by the provider.

Accountants and tax professionals

The source cites Rule 3.293 but does not reproduce it. Verify current food-service and disposable-item rules.

Common questions

Q: Was the employer's coffee-service charge taxable?
A: Yes, in full.

Q: Could paper cups, napkins, and stir sticks be bought tax-free?
A: Yes, as nonreusable items furnished with the coffee.

Q: Who paid tax on reusable items and taxable supplies?
A: The coffee-service provider.

Citations and references

• Rule 3.293 (food products, as cited in the letter)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8409L0594B08

Original ruling text

September 20, 1984

Dear ***:

Thank you for your letter asking whether you are required to collect:
sales tax on your charges to *** for your coffee service.

** provides the space and equipment to make the coffee.
You furnish the coffee, sugar, cream, cups, etc. and the employees to
make and serve the coffee. Twice a day you serve the coffee to
**'s employees at their desk. *** pays you
20 cents a cup for the coffee for a minimum of 672 cups of coffee
regardless of how many cups you actually serve.

You should collect tax from ** on the total amount you
charge for the coffee service. You can purchase tax free any
non-reusable items which are furnished to **'s employees
with the coffee, such as paper cups, paper napkins, and stir sticks.
You must pay tax on all reusable items and taxable supplies used in
providing the coffee.

I am enclosing a copy of a letter we sent to you in July 1981 which
contains the same information and Rule 3.293 on food products.

This opinion is based on the facts presented. If there are additional
or different facts, the opinion may change.

Please feel free to contact me if you have additional questions. You
may write me or call toll-free 1-800-252-5555 from anywhere in Texas.

Sincerely,

Mona Ezell Shoemate
Tax Administration Division