Can a caterer, hotel, or event planner give a resale certificate for tables, chairs, lighting, audio-visual equipment, or a margarita machine provided to a customer as part of a catering service?

Plain-English summary

A tax practitioner asked the Comptroller's office to revisit an earlier hearing decision (Hearing 26,488) and a 1992 letter, both of which required caterers to pay tax on tangible property they provide to customers — even though the customer also pays tax on the caterer's entire charge. The same rule had already been applied to bridal consultants and party planners, and the practitioner was specifically concerned about audio-visual equipment that hotels provide when they cater events.

The Comptroller's office reaffirmed the prior rulings. The reasoning: items like tables, chairs, lighting, and audio-visual equipment are not "rented" or "sold" to the caterer's customer because control of the items never passes to the customer — the caterer (or hotel) keeps possession and control throughout the event. The office drew an analogy to a case it had recently lost involving ice machines, where a court held that control of the machines did not pass to the customer either. Because no sale or rental of the tangible property occurs, the caterer cannot accept a resale certificate for that equipment, even when it bills for the equipment as a separate line item. Instead, the entire charge to the customer — food plus equipment — is subject to tax as part of the catering service.

On the purchase side, the letter also confirms the flip side of this rule: when a caterer or hotel buys or rents tangible property that it then uses to provide a taxable service (without passing possession to the customer), tax is owed both on the caterer's purchase/rental of that property and again on the caterer's subsequent taxable sale to the customer.

The Comptroller acknowledged that hotels under audit for this issue have the right to request a redetermination hearing, where an administrative law judge could potentially reach a different conclusion — for example, that certain items shouldn't be taxed as part of the overall charge, or that a resale certificate could be given for audio-visual equipment. But absent that, the office's position stood: no resale certificate, and the full charge is taxable.

What this means for you

Caterers and event planners

If you provide tables, chairs, lighting, sound/AV equipment, or similar items (like a margarita machine) as part of a catering or event-planning job, you cannot accept a resale certificate from your customer for that equipment — even if you bill for it as a separate line item. Because your customer never gets control or possession of the property, the whole charge you bill (food, service, and equipment) is treated as a taxable sale, and you should collect tax on the full amount. You may also owe tax yourself on your purchase or rental of that equipment.

Hotels providing audio-visual equipment for catered events

This letter directly addresses hotels that cater meals or events and separately charge for AV equipment as part of the service. The Comptroller applies the same caterer rule to hotels: if the hotel keeps control of the AV equipment and the customer merely uses it during the event, no resale certificate can be given, and the entire charge (including the AV charge) is taxable. This is true whether the event involves a full catered meal with an after-dinner speaker or just coffee and soft drinks with rented AV gear.

Accountants and tax professionals

This letter is a policy reaffirmation, not a new rule — it reiterates Hearing 26,488 and a prior 1992 letter and extends the same reasoning (control/possession does not pass to the customer) to hotel AV equipment, drawing an analogy to a lost court case on ice machines. If you have clients under audit on this issue, note that the letter itself acknowledges a redetermination hearing could reach a different result on the specific facts, since the author frames this as the office's position rather than a guaranteed outcome in every hearing.

Common questions

Q: Can a caterer give or accept a resale certificate for tables, chairs, or AV equipment provided to a customer?
A: No. Because control and possession of the equipment stay with the caterer, there is no sale or rental of that property to the customer, so a resale certificate is not appropriate.

Q: Is tax owed on the whole catering bill, or just the food?
A: The entire charge to the customer is subject to tax, including any amount separately stated for tables, chairs, lighting, audio-visual equipment, or similar items used in providing the catering service.

Q: Does this rule apply to hotels, not just caterers?
A: Yes. The Comptroller's office applies the same rule to hotels that cater meals or events and separately charge for audio-visual equipment, as well as to bridal consultants and party planners.

Q: If a caterer or hotel buys or rents this equipment, do they also owe tax on that purchase?
A: Yes. When tangible property is used to provide a taxable service and possession doesn't pass to the customer, tax is owed both on the caterer's own purchase or rental of the property and on the subsequent taxable sale to the customer.

Q: Can a hotel or caterer challenge this position if audited?
A: The letter notes that businesses under audit have the right to request a redetermination hearing, where an administrative law judge could potentially conclude that certain items shouldn't be taxed as part of the overall charge, or that a resale certificate may be given for audio-visual equipment.

Citations and references

No specific statutes or rule numbers were cited in this 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/9411L1327D13

Original ruling text

November 18, 1994

Dear *****:

Recently, you asked that I review Hearing 26,488 and a letter I wrote on October
29, 1992, concerning the taxation of tangible property provided by caterers. Both
the decision and my letter required caterers to pay tax on tangible property
provided their customers even though the customer would be required to pay tax on
the entire charge by the caterer. The same rule has been applied to bridal
consultants and party givers.

You were particularly concerned about tax on audio visual equipment provided by
hotels. We have followed the rule set out for caterers and applied it to hotels
when they cater meals and other events and as part of their service provide audio
visual equipment for a charge. The most difficult case is the one you point - the
rental of audio visual equipment when the hotel is providing only coffee and soft
drinks. The easier case is when they serve a dinner and the after dinner speaker
needs audio visual equipment.

Essentially, the hearing decision held that the items used by the caterer were
not rented to the customer because control of the items did not pass to the
customer. We recently lost a similar case in which we claimed control and
possession of ice machines passed to the customer. The court found that control
of ice machines did not pass to the customer. In the case of a caterer's
customer, while the customer may use the table, chairs, lights, and audio visual
equipment, a sale has not occurred of these items. The sale is of the catered
food and the items are provided as part of the catering service even though
separate charges are made for the tangible property used in connection with the
catering. Therefore, no resale certificate may be given and the entire charge to
the customer is subject to tax.

When tangible property is used to provide a taxable service or sale taxable items
and possession of the property does not pass to the customer, tax is owed on the
purchase (or rental) of the property and on the subsequent sale. Consequently, I
believe the hearing decision and my subsequent letter which followed the
decision are correct.

You point out that some of your client hotels are being audited. They have the
right to request a redetermination hearing. Upon review, an Administrative Law
Judge may conclude that these type items should not be taxed as part of the
overall charge by the hotel or that a resale certificate may be given for audio
visual equipment.

Should you have any further questions, please write me or give me a call
at 463-4004.

Sincerely,

Wade Anderson
Assistant Director Tax Administration

cc: Joe Galvan, Manager Tax Administration

NOTE: Previous Accession Number 9411771L