Tax Guide For Caterers

Helping your business succeed is important to the Board of Equalization. Taxes you collect and pay to the state help fund state and local services and programs important to you and your community. We recognize that understanding the tax issues specific to catering can be time-consuming and complicated, and want to get you the information you need so you can focus on starting and growing your business.

To help you better understand the tax obligations specific to caterers, we have created this guide to tax issues and information important to your business.



How to Use This Guide

Caterers

Each section of this guide contains information important to your business.

The Getting Started section provides key resources related to registration, filing returns, account maintenance and other important information you need.

The Industry Topics section covers many topics, each in an at-a-glance format that can be expanded to provide more extensive information if you need it.

Lastly, the Resources section provides links to a wealth of information, including web-based seminars, forms and publications, statutory and regulatory information, and access to live help from our customer service representatives.

Please note that this information included is general in nature and is not intended to replace any law or regulation.



Caterer

If You Need Help

If at any time you need assistance with topics included in this guide – or with others we may have not included – feel free to contact us by telephone or email for assistance. Contact information and hours of operation are available in the Resources section.

If you have suggestions for improving this guide, please contact us by email.

Getting Started

If you own a business in California, and you expect to be making taxable sales, you must register with us for a seller's permit and file regular sales and use tax returns. Whether you are new to catering or growing your existing business, you'll find these tools helpful in maintaining your account with us.

Registration

Online Registration — Register with us for your seller’s permit or add a business location to an existing account.

Filing and Payments

Industry Topics

Sales and Use Taxes in General

In California, all sales are taxable unless the law provides a specific exemption. In most cases, taxable sales are of tangible personal property, which the law defines as an item that can be seen, weighed, measured, felt, or touched.

Generally, you are considered to be a caterer if you serve meals, food, or drinks on premises supplied by your customer.

For the catering industry, most taxable sales are going to be of food and beverages. However, you may also be required to collect sales tax on mandatory tips, corkage fees, and charges for tables and tableware, among other things.

Use tax is a companion to California's sales tax, and is due whenever you purchase taxable items without payment of California sales tax from an out-of-state vendor for use in California. You also owe use tax on items that you remove from your inventory and use in California when you did not pay tax when you purchased the items. To pay use tax, report the purchase price of the taxable items under "Purchases Subject to Use Tax" on your sales and use tax return. Those purchases become part of the total amount that is subject to tax.

If you consume or give away taxable non-food items such as soda or alcoholic beverages that you purchased without paying sales tax, you owe an equivalent use tax – usually equal to the sales tax – based on the cost of those items to you.

For more information, see BOE publication 22, Dining and Beverage Industry.

Sales Suppression Software Programs and Devices

Beginning January 1, 2014, it will be a crime for anyone to knowingly, sell, purchase, install, transfer or possess software programs or devices that are used to hide or remove sales and to falsify records.

Using these devices gives an unfair competitive advantage over business owners who comply with the law and pay their fair share of taxes and fees. Violators could face up to three years in county jail, fines of up to $10,000, and will be required to pay all illegally withheld taxes, including penalties and interest.

Food and Drinks

As a caterer, charges you make to your customers for the preparation and serving of food and drinks are taxable.

For more information, see BOE publication 22, Dining and Beverage Industry.

Tables, Tableware, and Linens

Tableware means items like dishes, utensils, glasses, and pitchers that are used for serving and eating meals at a table. Similarly, tables and linens (tablecloth) are used to serve meals to your customers.

If you include charges for tableware in a single price for preparing and serving meals, the entire charge is taxable.

You may not use a resale certificate to purchase or rent non-disposable tableware, tables, or linens when you charge a single price to your customer.

If you separately itemize charges for the rental of tableware, tables, or linens, you are considered to be leasing the property to the customer. If you paid tax when you purchased the items, the rental is not taxable. If you did not pay tax when the items were purchased, your rental charge is taxable.

Disposable Tableware

Disposable tableware, such as plastic utensils and paper plates, may be purchased without payment of tax if you issue a resale certificate to your supplier.

Any charges you make to your customers for disposable tableware are taxable, whether or not your billings are itemized.

For more information, see BOE publication 22, Dining and Beverage Industry.

Labor and Food Preparation Charges

As a caterer, charges that you make to your customers for the preparation and serving of food and drinks are taxable. Tax applies even if you do not provide the food or drinks, or if the preparation or service is performed by an employee or subcontractor.

For more information, see BOE publication 22, Dining and Beverage Industry.

Charges for Serving Customer-Furnished Food and Beverages

As a caterer, any charges you make to your customers for preparing or serving food or beverages they provide are taxable. For example, tax applies to any charges you make for cutting and serving a wedding cake or opening and serving customer-furnished wine.

For more information, see BOE publication 22, Dining and Beverage Industry.

Dance Floors and Stage Equipment

Generally, if you paid sales or use tax on the purchase or rental of items unrelated to the service or preparation of meals - such as a dance floor, podium, or audio-video system - tax does not apply to the rental of such property to your customers. If you did not pay tax when you purchased or rented the items from your supplier, rental charges you make to your customers for the use of the items are taxable.

For more information, see BOE publication 46, Leasing Tangible Personal Property.

Menus, Programs, and Other Miscellaneous Property

Charges you make to your customers for items such as printed programs and menus, floral arrangements, balloon displays, ice sculptures, and the like are generally subject to tax.

For more information, see BOE publication 22, Dining and Beverage Industry.

Coordinator Fees

As a caterer, charges you make to your customers for the planning and coordination of events are taxable if they are related to the sale of tangible personal property. For example, if the purpose of planning a reception is the preparation and service of food and beverages, charges you make to your customers for coordinating the reception are taxable.

For more information, see BOE publication 22, Dining and Beverage Industry.

Sales for Resale

Tax does not apply to charges you make to prepare food or drinks for a buyer who will in turn sell them at retail and report tax on their sale.

In such cases, the buyer should provide you a valid resale certificate at the time of sale.

For more information, see BOE publication 103, Sales for Resale.

Parking Attendants, Security, and Entertainment

Provided that they are not participating in the preparation or service of food or drinks, charges you make to your customers for parking attendants, security guards, and entertainment are not subject to tax.

For more information, see BOE publication 22, Dining and Beverage Industry.

Sales to the United States Government

Sales to the U.S. government are exempt from tax. If you make such sales, you must keep purchase orders showing the sales were made directly to the U.S. government.

If the purchase is paid by credit card, you must keep copies of the sales invoice and the credit card receipt. To qualify for the exemption the credit card must belong to the U.S. government.

For more information, see BOE publication 102, Sales to the United States Government.

Meals Served at a School

Generally, your sales of meals and other food products to students in school are taxable, whether you are hired by a school, school district, or student organization. Such sales are generally taxable whether you are paid by the school or by students or parents.

Charges you make for preparation and service of meals to students at school are not taxable if your contracts and records show that:

  • The facilities you use to serve meals to the students are routinely used by the school for other purposes, such as sporting events and other school activities;
  • The fixtures and equipment you use to prepare and serve the meals are owned and maintained by the school, and;
  • The students purchasing the meals cannot distinguish between you or your employees from other employees of the school.

For more information, see BOE publication 22, Dining and Beverage Industry.

Mobile Food Vendors

If you sell hot prepared food or soda, even temporarily, you must register with us for a seller's permit.

Mobile food vendors are subject to similar tax reporting requirements as brick-and-mortar restaurants, but should pay sales or use taxes at the rate in effect at the location where the sale is made. Since you may be on the move, you are responsible to collect the district tax, if any, at each location where your sales are made throughout the day. For example, if you make sales in Anaheim (Orange County) in the morning, you will report those sales at the Orange County rate (currently 8.00%). Later in the day, if you make sales in Norwalk (Los Angeles County), you will report those sales at the Los Angeles County rate (currently 9.00%). To report district tax click the "District Tax" button where it says "click to enter District Tax" when filing your sales and use tax returns online. A comprehensive listing of city and county sales and use tax rates can be found on our website at www.boe.ca.gov/sutax/pam71.htm.

All Your Sales May be Taxable

The "80/80 rule" applies when 80 percent of your sales are food and 80 percent of the food you sell is taxable. If the 80/80 rule applies to your business and you do not separately track sales of cold food products sold for take-out, you are liable for tax on 100 percent of your sales.

If the 80/80 rule applies to your business, you may elect to separately account for sales of to go orders of cold food products. You must report and pay tax on all food and beverages sold, unless:

  • The sale is nontaxable, or
  • You make a special election not to report tax on to go sales even though your sales may meet both criteria of the 80-80 rule. Such sales include:
    • Cold food products, and
    • Hot bakery goods and hot beverages that are sold for a separate price.

Sales of those products must be separately accounted for and supported by documents. Without adequate documentation, 100 percent of your sales are subject to tax.

Hot Prepared Food

Hot prepared food that you serve to your customers is taxable.

A food product is hot when it is heated to above room temperature, and is still considered hot even after it has cooled, because it is intended to be sold in a heated condition.

If you sell a combination package – two or more items sold for a single price - that includes a hot prepared food, the entire combination package is taxable.

Notable Exception: Hot Bakery Goods

The sale of hot bakery goods (for example: donuts, muffins) to go are exempt from sales tax. If sold in a combination package with hot prepared foods or with a hot beverage, however, the entire combination package is taxable.

Cold Food

Unless you qualify for the 80/80 rule and do not separately track sales of cold food, your sales of cold food products sold individually are not taxable.

Cold food products include cold sandwiches, milkshakes, smoothies, ice cream, and cold salads, among others.

Cold food that is sold as part of a combination package, depending on the other contents of the package, may be taxable.

Combination Packages

A combination package is two or more items sold together for a single price – may be taxable if it is sold for take-out, depending on the contents of the package.

If you sell a hot prepared food with cold food in a combination package, the entire package is taxable. If you include a soda with a combination package of cold food, the portion of the sales price that represents the soda is taxable.

Keeping Adequate Books and Records

Businesses that are required to hold a seller's permit because they make taxable sales in California should keep books and records that are necessary to accurately determine their tax liability. In most cases, that means normal "books of account" and the bills, invoices, and other documents that support them. In addition, owners and operators should keep the schedules and working papers used to prepare tax returns.

Sales Suppression Software Programs and Devices

Beginning January 1, 2014, it will be a crime for anyone to knowingly, sell, purchase, install, transfer or possess software programs or devices that are used to hide or remove sales and to falsify records. Using these devices gives an unfair competitive advantage over business owners who comply with the law and pay their fair share of taxes and fees. Violators could face up to three years in county jail, fines of up to $10,000, and will be required to pay all illegally withheld taxes, including penalties and interest.

Pricing Menu Items "Sales Tax Included"

Many mobile food truck vendors choose to price their menu items with sales tax included in the selling price. If you do price your menu items "sales tax included", you must place a notice in a location where it can be seen by your customers that says "all prices of taxable items include sales tax reimbursement."

For more information, see BOE publication 22, Dining and Beverage Industry.

Resources

Need to know more? Follow the links below for more information about the topics covered in this guide, as well as other information you might find helpful:

Top Resources

Other Industry-Specific Resources

Publications

Special Notices and Articles

Sales and Use Tax Law and Manuals

Other Helpful Resources

  • Sign Up for BOE Updates — Subscribe to our email lists and receive the latest news, newsletters, tax and fee updates, public meeting agendas, and other announcements.
  • Videos and How-To Guides — These resources will help you avoid common mistakes, file your tax returns online, and more.
  • City and County Tax Rates — A listing of current and historical tax rates.
  • Special Notices — BOE special notices are issued whenever there is a change in law, tax rates, or BOE procedures.
  • BOE Online Services — Learn about the online services BOE offers.
  • Verify a Permit or License — You can use this application to verify a seller's permit, Cigarette and Tobacco product retailer license, eWaste account, or Underground Storage Tank Maintenance Fee Account.
  • BOE Field Offices — A comprehensive listing of all BOE field offices and contact information.
  • Find Your Board Member — You can use this application to quickly identify your elected BOE representative.
  • Get It In Writing! — The Sales and Use Tax Law can be complex, and you are encouraged to put your tax questions in writing.
  • Taxpayers' Rights Advocate (TRA) — The TRA Office helps taxpayers when they are unable to resolve a matter through normal channels, when they want information regarding procedures relating to a particular set of circumstances, or when there are apparent rights violations.
  • Contact Us — A listing of BOE contacts for your questions and concerns.