Ezel / Tax Rulings / TX
TX 9003L0992C13 Sales and/or Use Tax (State,Local,MTA) 1990-03-08

Was a retailer's supplier reimbursement taxable when suppliers covered 50% to 75% of food, drink, and supply costs for a free customer barbecue?

Short answer: No. The reimbursement was not subject to sales tax because the free barbecue was a jointly sponsored promotional event. The retailer paid tax on taxable event purchases, and the supplier payments did not reimburse meal-preparation labor.

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This page answers the general question as of 1990. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1990
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

A retailer and its suppliers jointly sponsored a free barbecue for customers. Supplier reimbursements covered 50% to 75% of the food, drinks, and supplies, but not the labor used to prepare the meal.

The retailer paid tax on all taxable event purchases. The Comptroller ruled that the supplier reimbursements were not subject to sales tax because they funded the jointly sponsored promotional event.

Common questions

Were the supplier reimbursements taxable? No.

What costs did they cover? Part of the food, drink, and supply costs, but not preparation labor.

Did the retailer pay tax on event purchases? Yes, on taxable items.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

March 8, 1990

Dear ***:

Thank you for your inquiry concerning the application of sales tax
to a free for customers Bar-B-Q.

You have advised me by telephone that the reimbursement you receive
from your suppliers covers the 50% to 75% of the cost of the food,
drinks, and supplies used. It does not include a reimbursement for
labor in preparing the meal. You also stated that you pay tax on
all taxable items purchased for the event.

This is a promotional event, jointly sponsored by you and your
suppliers. The reimbursement you receive from your suppliers is
not subject to sales tax.

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

Should you have any additional questions or need more information,
please call our toll-free number 1-800-252-5555. The regular
number is 512/463-4600. You may write me by directing your letter
to the attention of Tax Correspondence.

Sincerely,
G. C. Edgar
Tax Correspondence

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