What Texas sales-tax rule did an internal Comptroller memo identify for complimentary restaurant meals, appetizers, and beverages?

Plain-English summary

An internal Texas Comptroller memo asked for guidance on three situations: restaurant meals given to special guests, appetizers a hotel-linked restaurant gave the public during happy hour, and appetizers a bar or nightclub gave the public during happy hour.

The memo's policy-research section quotes Rule 3.293(e)(3): meals and beverages furnished to customers free as promotional items were taxable to the restaurant owner only to the extent tax would have been due on the original purchase price of the food or drinks from suppliers.

The record contains no separate response applying that rule to each question.

What this means for you

The quoted rule did not tax the customer on a zero-price promotion. Instead, it looked back to whether tax would have been due when the restaurant owner acquired the food or drink from suppliers.

Common questions

What situations did the memo ask about? Special-guest meals and free happy-hour appetizers at a hotel-linked restaurant, bar, or nightclub.

What rule did the memo quote? Comptroller Rule 3.293(e)(3).

What did the quoted rule say? Free promotional meals and beverages were taxable to the restaurant owner only to the extent tax would have been due on the original supplier purchase.

Did the record separately decide each of the three questions? No.

Did the memo specifically discuss alcoholic beverage tax? No. Alcoholic beverages appear in STAR's caption, but the body does not separately analyze them.

Citations and references

• Comptroller Rule 3.293(e)(3) — quoted verbatim in the internal memo.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8704L0810F03

Original ruling text

INTEROFFICE BOB BULLOCK
MEMORANDUM COMPTROLLER OF
PUBLIC ACCOUNTS

DATE April 13, 1987

To: Joel Cantu, ***

FROM: Adina Whittemore, Tax Policy Section

SUBJECT: Questions Concerning Tax on Meals Given Away by Food
Service Operators from Joel Cantu, *** Audit

Please provide a taxability response on the following questions:

1. "Should a restaurant report the tax on meals which they prepare, and
   are given away to special guests? (Given the assumption that the purchases are
   non-taxable by nature in
   the unprepared stage, are there any tax liabilities?)"

2. "Should a restaurant who is linked to a night-club such as a hotel
   report the tax on appetizers which they prepare, and give away to
   the public during happy hour?"

3. "Should a bar or night-club report the tax on appetizers which they
   prepare, and give away to the public during happy hour?"

Policy Research:

Rule 3.293 (e)(3)

"Meals and beverages furnished to customers free of charge as promotional
items are taxable to a restaurant owner only to the extent tax would have
been due on the original purchase price of the food or drinks from
suppliers."