Can caterers, party planners, florists, and bridal consultants who rent tables, linens, china, vases, and candelabras to re-rent to their own customers use a resale certificate instead of paying tax on the rental?

Plain-English summary

A rental company got conflicting answers from four different Comptroller staffers (split two and two) on a practical question: when caterers, party planners, florists, and bridal consultants rent tables, chairs, linens, china, vases, and candelabras from them -- and then pass that cost (sometimes with markup) on to their own customers, charging those customers tax -- should the rental company charge these renters tax on the original rental? Or can the renters use a resale certificate instead?

The Comptroller drew a clean line based on what the renter's business actually is:

• Food service operators -- restaurants, caterers, party planners, bridal consultants, and others who serve prepared food -- may not rent tax-free for resale the equipment they use to serve food, nor the items used to decorate the tables or facilities where the food is served. They owe tax on the rental itself, even though they later re-rent or bill the items to their own customers.
• A florist that is not in the business of providing or serving prepared food, by contrast, may give the rental company a resale certificate instead of paying tax, because the florist is genuinely re-renting the items to its own customers rather than using them to serve food.

So the same physical items (vases, candelabras, linens) get different tax treatment depending entirely on whose business is renting them and what that business does with them.

What this means for you

Party/event rental companies

Whether you charge tax on a rental to a caterer, florist, bridal consultant, or party planner depends on whether that customer serves prepared food. Food-serving businesses owe tax on the rental regardless of any resale certificate they present; florists and similar non-food-service renters can properly use a resale certificate.

Caterers, restaurants, and other food service operators

You cannot use a resale certificate to rent tax-free the equipment you use to serve food or decorate your service area, even if you separately charge your own customers tax on the full package. You owe tax on your rental cost.

Florists, bridal consultants, and event planners who don't serve food

If you're genuinely re-renting decor items (not using them to serve food), you may issue a resale certificate to the rental company in lieu of paying tax, since you'll be charging your own customers tax on the eventual rental to them.

Accountants and tax professionals

A useful bright-line distinction for reviewing event-industry clients' rental invoices -- the test isn't the item being rented, it's whether the renting business is a food-service operation. Worth flagging that this letter reports the Comptroller resolving genuinely conflicting internal guidance the taxpayer had received, so it's a good citation to have on hand for this specific fact pattern.

Common questions

Q: Can a caterer use a resale certificate to rent tables and linens tax-free?
A: No. Food service operators who serve prepared food cannot rent equipment or decor items tax-free for resale.

Q: Can a florist use a resale certificate to rent vases and candelabras it will re-rent to its own customers?
A: Yes, as long as the florist is not itself in the business of providing or serving prepared food.

Q: What if the same rental company serves both caterers and florists?
A: The rental company should charge tax to food-service renters (caterers, party planners who serve food, bridal consultants who serve food) and may accept a resale certificate from florists and similar non-food-service renters.

Q: Can I rely on this letter for my own rental business?
A: No. It is based on the specific facts presented and can only be relied on by the taxpayer to whom it was issued; other, even similar, facts may yield a different result.

Citations and references

This letter applies general Comptroller policy distinguishing food-service equipment/decor rentals from other rentals for resale purposes; the letter itself does not cite a specific numbered Tax Code section or rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9907535L

Original ruling text

July 8, 1999

Dear Ms. **:

This is in response to your request for a ruling on the following fact
situation and questions:

Please give us a clear final answer that we may present to our customers on the
tax exemption status of caterers, party planners, florists, and bridal
consultants who rent from us. We have had conflicting response from four
people in your office, split two and two.

These professionals rent tables, chair, linens, china, vases, candelabras,
etc., from us and pass that cost, plus mark up sometimes, to their customers
who are charged tax. Quite simply do we charge these caterers, party planners,
florist and bridal consultant tax on the original rental from us? Or are they
exempt under a resale status with the properly completed resale certificate?

Response: Food service operators, including restaurants, caterers, party
planners, bridal consultants and others who serve prepared food may not
purchase, lease, or rent tax-free for resale, the equipment they use to serve
the food nor items used to decorate the tables or facilities where the food is
served.

A florist, that is not engaged in the business of providing or serving prepared
food, may provide your company with a resale certificate in lieu of paying
sales tax on rental items that it will re-rent to its customers.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this information answers your questions. If you need additional
information, please call me toll-free at 1-800-531-5441, extension 3-4502. The
direct line is 512/463-4502. You may also write to Tax Policy Division,
Comptroller of Public Accounts. You may also e-mail our tax help section at:

Sincerely,

Gilbert Zamora
Tax Policy