When an event planner bills a client for a mix of food, rentals, decorations, and entertainers, which of those charges are subject to Texas sales tax?

Subject

Event Planner/Party Planner — Renting Place; Band; Custom Invitations; Catering; Casino Games; Magician; Decorations; Caricature Drawing

Plain-English summary

An event-planning company wrote to the Comptroller asking how sales tax applies to the mix of charges on its client invoices -- food, rentals, decorations, and entertainers. The Comptroller answered the general questions and then walked through six sample invoices line by line.

General rules:

• Food and refreshments may be stated separately in the contract or invoice, but all charges related to the sale of food are taxable (citing Section 151.007 of the Texas Tax Code).
• The event planner must pay tax when it buys or rents items -- food service equipment, tables, chairs, decorations -- that it uses to provide its service. It cannot buy those tax-free, even though it must collect tax when it resells catered food to its own customers (citing Rule 3.293, subsections (f)(3) and (f)(5)). But items that are actually furnished or transferred to the customer along with the meal can be purchased tax-free using a resale certificate (Rule 3.293, subsections (f)(4) and (f)(6)).
• There is no lump-sum billing exception in the law that would let the planner avoid collecting tax just because it paid tax on the goods and services it bought.

Invoice-by-invoice results:

• Decor, entertainers, and coordination fee: the planner can buy/rent items transferred to the customer using a resale certificate, then must collect tax from the customer on the total charge for those items (including delivery, set-up, or installation). No tax is due on the charge for the entertainers.
• Catering and entertainment: the planner can buy the catered food and other taxable items transferred to the customer tax-free with a resale certificate, but owes tax itself on taxable items it uses to provide the meal (tables, chairs, portable toilets, tents, generators, floral arrangements, candles). Tax is due from the customer on the total charge for the catered meal, including separately stated items like bartenders. The magician and band charges are not taxable. Video copies sold are taxable (with a resale certificate available for footage transferred to the customer); a delivery van charge for delivering the meal is part of the taxable sales price of the meal.
• Costume character/costume rental, bus rental, and other items: the costume character charge is not taxable, but the planner owes tax on the rented costume itself. A bus charge is not taxable if the bus transports people from one place to another, but is taxable if its primary purpose is a sightseeing tour (citing Rule 3.298, Subsection (a)(1)(F)(v)). An admission-type charge may be resold tax-free via certificate with tax then collected from the customer. Balloons and party favors may also be purchased via resale certificate, with tax collected from the customer. Face painting is not taxable. A "spacewalk" (inflatable) charge may be purchased via resale certificate with tax collected on the resale.
• Tent, tables, chairs, delivery, plastic cloths, centerpieces, audio system (no food service): the planner may buy these via resale certificate and must collect tax on the total charges to the customer.
• Rentals and catering: the planner owes tax on all rentals/purchases used to provide the catered meal, may issue a resale certificate to the caterer, and must collect tax on the total charges billed to the customer. The entertainment charge is not taxable.
• Banners, string quartet, and balloons: the planner may use a resale certificate for the banners and balloons, and must collect tax from the customer on those charges plus delivery. No tax is due on the string quartet charge.

The Comptroller added a caution: invoices need enough detail for an auditor to tell what a charge is for -- vague descriptions like "labor" or "assembly" are not enough. As with all these letters, the opinion is based on the facts presented and could change with different facts.

What this means for you

Event and party planners

Break your invoices into clearly described line items rather than one lump sum. Goods you buy or rent and then pass through to the customer (decorations, tables, chairs, tents, banners, balloons, party favors, audio equipment, costumes) can typically be purchased tax-free with a resale certificate, but you then must collect sales tax from your customer on those charges, including any delivery, set-up, or installation fees. If instead you use rental items yourself to perform your service (rather than transferring them to the customer), you must pay tax when you buy or rent them and cannot use a resale certificate.

Caterers and food-related vendors working with planners

All charges related to the sale of food are taxable, including separately stated add-ons billed in connection with the meal (like bartenders). You may buy the catered food and other taxable items you transfer to the customer tax-free via resale certificate, but you owe tax yourself on items you use (not transfer) to provide the meal -- things like tables, chairs, portable toilets, tents, generators, floral arrangements, and candles.

Entertainers, performers, and their bookers

Charges purely for live entertainment -- a band, a magician, a string quartet, a costume character's performance, face painting -- are not taxable. But if a rental item is involved (like a costume rented for a costume character), tax applies to that rental even though the performance charge itself is not taxable.

Common questions

Q: If an event invoice includes food, is the whole invoice taxable, or just the food?
A: The Comptroller said food and refreshments may be stated separately, and all charges related to the sale of food are taxable, but did not give a blanket answer for the whole invoice -- it depends on what else the invoice includes. See the invoice-by-invoice discussion above.

Q: Can an event planner buy decorations, tables, and chairs tax-free if it will collect tax when reselling them to the customer?
A: Only if those items are actually furnished or transferred to the customer. If the planner instead uses the items itself to provide its service (rather than transferring them), it must pay tax on the purchase or rental and cannot buy tax-free.

Q: Is there a lump-sum billing option so the planner doesn't have to itemize and collect tax on each item?
A: No. The letter states directly there is no such provision in the law.

Q: Are charges for a band, magician, or other live entertainer taxable?
A: No. The letter repeatedly states that charges for a magician, a band, a string quartet, a costume character's performance, and face painting are not taxable.

Q: Is a bus rental charge for a party always taxable?
A: Not necessarily. It is not taxable if the bus is used to transport people from one location to another, but it would be taxable if the primary purpose is sightseeing along a route (citing Rule 3.298, Subsection (a)(1)(F)(v)).

Q: What level of detail does an invoice need for tax purposes?
A: The letter cautions that invoices should contain enough detail to let an auditor determine the nature of a charge -- vague descriptions such as "labor" or "assembly" are not sufficient.

Citations and references

• 151.007 of the Texas Tax Code (taxability of charges related to the sale of food)
• Rule 3.293, subsections (f)(3), (f)(4), (f)(5), (f)(6) (tax treatment of items used versus transferred in providing catering/event services)
• Rule 3.298, Subsection (a)(1)(F)(v) (taxability of bus/transportation charges)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9609L1431G04

Original ruling text

September 17, 1996

Dear **:

Thank you for your letter of August 23, 1996. You asked that we address the
tax responsibilities of event planners.

Specifically, you asked:

(1) If an event includes any food items or refreshments, is the entire contract
subject to sales tax or only separately stated food items? Can the food or
refreshments be invoiced separately.

Response: I cannot answer this question without knowing what other charges are
included in contract. Hopefully, all situations will be addressed when I
discuss the taxability of the invoices you enclosed.

The food and refreshment may be separately stated in the contract or invoice.
All charges related to the sale of food are taxable. See 151.007 of the Texas
Tax Code.

(2) If my client has paid tax on the purchase of decorations and the rental
of chairs and tables, do they have to charge sales tax when the items are
provided as part of the service?

Response: Your client is required to pay tax on rental items (e.g., food
service equipment, tables, chairs, and decorations) used to provide its
service. They are not allowed to make these purchases tax-free, even though
they are required to collect tax on sale of catered food sold to its
customers. See subsections (f)(3) and (f)(5) of Rule 3.293. Items that
are furnished or transferred to your client's customers with the meal may be
purchased tax free. Please refer to Subsection (f)(4) and (f)(6) of Rule
3.293.

(3) Is there a provision in the law where its services would be a lump-sum
billing, since it pays tax on all related goods and services?

Response: No.

The first invoice, ABC COSMETICS, contains charges for decor, entertainers,
and a coordination fee. Your client may issue a resale certificate for the
purchase or rental of items transferred to its customer. Your client is
responsible for collecting tax from its customer on the total charge for
the items including delivery, set-up or installation. Tax is not due on
the charge for the entertainers.

The second invoice, DEF EVENT, contains charges for catering and entertainment.
Your client may purchase the catered food and other taxable items that are
transferred to its customer tax free by issuing a resale certificate to the
food service providers and vendors. Your client owes tax on taxable items
used to provide the catered meal such as tables, chairs, portable toilets,
tents, generators, floral arrangements, and candles. Tax is due from the
client's customer on the total charge billed for the catered meal including
all separately stated expenses (e.g., the charge for providing bartenders)
billed in connection with the meal. See 151.007 of the Texas Tax Code.

Charges for the magician and band are not taxable to your client or its
customer. If the videographer is providing your client with videos that are
transferred to its customers, your client may issue a resale certificate to
the videographer. Sales tax is due on the copies of the videos sold. If the
van is used to deliver the meal, the charge is an expense connected to the
sale of the meal and is included in the sales price of the meal.

The third invoice is not titled, but the first charge is for a costume
character and a costume rental. The costume character charge is not taxable.
Your client owes tax on the costume rented for the character. The second
charge is for a bus rental. The charge for the bus is not taxable if the
bus is used to transport persons from one location to another. However, the
charge would be taxable if the primary purpose is to show tourist sights along
a route. See Rule 3.298 Subsection (a)(1)(F)(v). The charge for GHI is
unclear. If the charge is to gain admission to an establishment providing
dancing, music, or other entertainment, your client may issue a resale
certificate to GHI in lieu of paying tax on the admission. Your client is
responsible for collecting tax on the charge to its customer. Your client may
also issue a resale certificate for balloons and party favors transferred to
the client and the food served. Your client is responsible for collecting tax
from its customer on these charges. No tax is due on the charge for face
painting. Your client may issue a resale certificate for the spacewalk and
collect tax on the charge to its customer.

The fourth invoice, JKL TENT, does not contain a charge for food service.
The invoice contains charges for a tent, tables and chairs, delivery, plastic
cloths, centerpieces, and an audio system. Your client may issue a resale
certificate to its vendors and collect tax on the total charges for rental
or sales of these items.

The fifth invoice, MNO, contains charges for rentals and catering. Your
client owes tax on all rentals and purchases used to provide the catered
meal. The client may issue a resale certificate to the caterer and is
responsible for collecting tax on the total charges billed to its customer.
No tax is due on the entertainment charge.

The sixth invoice, PQR, contains charges for banners, a string quartet and
balloons. Your client may issue a resale certificate for the banners and
the balloons to its vendors. Your client should collect tax from its
customer for these charges and the delivery. No tax is due on the charge
for the string quartet.

A word of caution. The invoices should contain enough detail to allow an
auditor to determine the nature of a charge. Descriptions such as labor
or assembly are too vague and should list what the charge is related to.

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

You may call me toll free at 1-800-531-5441, ext. 5-0037. The direct line
is 512/475-0037. You also may write to Sales Tax Policy Division,
Comptroller of Public Accounts.

Sincerely,

Lindey Osborne
Sales Tax Policy Division

NOTE: Previous Accession Number 9609574L