Texas Letter Ruling 9211L1209A14: Disposable/Nonreusable Items (Placemats, Plates, Cups, Tray Liners, Toothpicks) — Food Service Operators' Purchases Under Resale Or Exemption Certificate

Plain-English summary

The Texas Comptroller's Tax Policy Division confirmed, in a follow-up letter after an in-person visit, that a company designing and selling paper activity placemats to restaurant chains can accept a resale certificate from those restaurant chains instead of collecting sales tax.

The taxpayer in this letter designs paper activity placemats meant for children eating in a restaurant, sells them to restaurant chains, and ships them directly to individual restaurant locations at the direction of the restaurant chain's headquarters. The Comptroller explained that the restaurant chain may issue a resale certificate in lieu of paying tax on those placemats.

The basis for this answer is Rule 3.293(f)(4), which the letter quotes directly: "Operators of eating establishments may purchase on resale certificates those items which are furnished to their customers with the food or beverages. These items must be of a non reusable nature. Examples include non reusable paper articles." Because the paper placemats are furnished to restaurant customers along with their food and are non-reusable, they fit squarely within this rule. The letter also cautions that this treatment does not extend to items that are reusable in nature, and that the opinion is based on the facts presented -- if the facts differ, the answer could change.

What this means for you

Manufacturers and suppliers of disposable food-service items

If you sell non-reusable paper products (like activity placemats, plates, cups, tray liners, or similar items) to restaurants or other eating establishments for the establishments to furnish to their customers with food or beverages, you can generally accept a resale certificate from that restaurant customer instead of charging them sales tax, per Rule 3.293(f)(4).

Restaurant owners and operators

You may issue a resale certificate when purchasing non-reusable paper items (placemats, cups, plates, tray liners, toothpicks, and similar disposable articles) that you furnish to your customers along with food or beverages. This does not apply to reusable items -- those remain subject to tax when you purchase them, since you are the end user of reusable equipment rather than reselling it to the customer.

Accountants and tax professionals

This letter is a useful, concrete illustration of Rule 3.293(f)(4) applied to paper placemats specifically, including a supply-chain fact pattern where the seller ships directly to individual restaurant locations at the direction of the restaurant chain's headquarters rather than to the chain's headquarters itself. The resale-certificate treatment turns on the item being (1) furnished to the customer with food or beverages and (2) non-reusable.

Common questions

Q: Can a restaurant buy paper placemats without paying sales tax?
A: Yes, according to this letter, if the placemats are non-reusable and furnished to customers along with food or beverages, the restaurant can issue a resale certificate to the seller in lieu of tax, under Rule 3.293(f)(4).

Q: Does this apply to reusable placemats or other reusable items?
A: No. The letter specifically states that "this provision does not apply to items that are of a reusable nature."

Q: What other items would this cover besides placemats?
A: The stub title references plates, cups, tray liners, and toothpicks as similar examples, and Rule 3.293(f)(4) itself gives "non reusable paper articles" as an example category -- any non-reusable item furnished to customers with food or beverages would fit the same reasoning.

Q: Can I rely on this letter for my own business?
A: This letter confirms information given to one specific taxpayer based on the facts that taxpayer presented. The Comptroller notes the opinion is based on the facts presented and may change if the facts are different or additional.

Citations and references

Rules:

• Rule 3.293(f)(4) (resale certificates for non-reusable items furnished to customers with food or beverages)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9211L1209A14

Original ruling text

November 23, 1992

Dear **:

Thank you for the opportunity to assist you during your visit to the local
office on October 20, 1992. It is always a pleasure to give a taxability answer
that pleases the taxpayer. In my position that pleasure does not come around
often enough.

This letter is to confirm the verbal information I provided to you during that
visit. You explained that you will be designing paper activity place mats that
are given to children eating in a restaurant. You will be selling these paper
place mats to restaurant chains such as **'s. You will ship the
place mats to the various restaurants at the direction of **'s
headquarters.

I explained that **'s may issue a resale certificate to your
company in lieu of tax. This answer is based upon Rule 3.293(f)(4) which
states, "Operators of eating establishments may purchase on resale certificates
those items which are furnished to their customers with the food or beverages.
These items must be of a non reusable nature. Examples include non reusable
paper articles."

I trust this is sufficient documentation for your records. Please remember,
this provision does not apply to items that are of a reusable nature.

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

Sincerely,

Tax Policy Division
Tax Administration