Is Texas sales tax due on the food, beverages, and videotaping charges a focus-group coordinator bills to its clients?

Plain-English summary

A company in the business of coordinating focus group sessions for clients across various industries asked the Comptroller's office how sales tax applies to the charges it bills its clients. The company solicits targeted individuals to participate, provides the facility for the session, provides food and beverages for participants, and at times hires videotaping companies to tape the session and gives the client a video tape of it. The sessions themselves are run by the client's own representatives — the coordinating company does no studies, just handles logistics. The company pays all expenses up front and then invoices the client for the cost of participants, food and beverages, use of the facility, and the videotaping services and tapes.

The Comptroller responded that the answer depends on how the invoice is written. If the charges for food and beverages and for video tapes (including the taping services) are separately stated on the invoice, those separately stated charges are taxable to the customer. But if the invoice simply reads "Focus Group Session" followed by one lump amount, with no breakout of the individual components, then the entire charge is taxable — because that single charge necessarily includes the taxable sale of food, beverages, and video tapes, and there's no way to separate out any non-taxable portion.

What this means for you

Focus-group coordinators and market research firms

How you format your client invoices affects what's taxable. If you separately state the charges for food/beverages and for videotaping (including the cost of the taping service itself), only those specific line items are subject to sales tax. If you instead bill everything as a single "Focus Group Session" charge, the whole amount becomes taxable, even the portions that arguably wouldn't be taxable on their own (such as facility rental or participant fees).

Businesses that hire focus-group coordinators

If you're the client paying for these services, expect sales tax to apply either to the specific separately stated food, beverage, and videotaping charges on your invoice, or to the full invoice total if those items aren't broken out separately.

Accountants and tax professionals

This letter is a useful illustration of the separately-stated-charges principle in Texas sales tax: bundling a taxable item (food, beverages, video tapes) into an undifferentiated lump-sum charge with otherwise non-taxable services can pull the entire charge into the tax base, while itemizing preserves the distinction.

Common questions

Q: Are charges for food and beverages provided at a focus group session taxable?
A: Yes, if separately stated on the invoice, those charges for food and beverages are taxable to the customer.

Q: Is the cost of videotaping a focus group session taxable?
A: Yes. Separately stated charges for video tapes, including charges for the taping services, are taxable to the customer.

Q: What happens if the invoice just says "Focus Group Session" with one total price?
A: The entire charge is taxable, because it isn't broken out from the taxable sale of food, beverages, and video tapes included within it.

Q: Does it matter that the coordinating company doesn't run the actual focus group sessions?
A: No. The letter addresses only the tax treatment of the food, beverage, and videotaping charges billed to the client; the fact that the client's own representatives run the sessions doesn't change that analysis.

Citations and references

No statutes or rules are cited in the letter's text.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9408L1312C11

Original ruling text

August 30, 1994

Dear *****:

Thank you for your August 16, 1994, letter concerning the taxability
of activities related to coordinating focus group sessions in Texas.

Your company is in the business of coordinating focus group sessions
for clients in various industries. These group sessions provide market
research information to the various companies in industry. Your company
does the following in providing the coordination of these sessions:

1) Solicits targeted individuals to participate in the group session.

2) Provides the facility to hold the session.

3) Provides food and beverages for participants in the session.

4) Hires videotaping companies, at times, to tape the session and
provides customers with a video tape of the group session.

The sessions are actually run by representatives of your clients
companies. Your company does no studies, but merely coordinates the
event. All expenses of the session are paid by you. You then invoice
your client for the cost of the participants, food and beverages, use
of the facilities, and cost of the video taping services and individual
video tapes provided to your client.

Questions:

1) Are the various charges indicated above subject to sales tax if
reflectedseparately on the sales invoices issued by your company?

Response: Any separately stated charges for food and beverages and for
video tapes (including charges for taping services) are taxable to the
customer.

2) Are the charges subject to sales tax if the invoice read only "Focus
Group Session" followed by an amount?

Response: Unless separately stated, the total charges are taxable because
the charges include the taxable sale of food and beverages and video tapes.

This opinion is based on the facts you submitted. Other facts, though
similar, may yield different results.

You may call me toll free at 1-800-531-5441, ext. 5-0030. The direct line
is 512/475-0030. You may also write to Tax Administration, Comptroller of
Public Accounts.

Sincerely,

David Somerville
Tax Administration Division

NOTE: Previous Accession Number 9408525L