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Wedding Tax on service fee? (CA)

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Gypsy

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So are you taxed on the 18-20% service charge your venue/caterer charges you in addition to being taxed on food and beverage? Or are you taxed on the food and beverage... and the service charge is assessed on the pre-tax total of food and beverage and not taxed?

Inquiring minds want to know. In addition, on the off chance anyone can link me to the law/code that states and governs this, I''d appreciate it. I''m not up on my restuarant law.

Thank you!
Layla
 
I don''t have an answer, but I''m going to bump this because FI and I have the EXACT same question. Looking at all the quotes, they calculate the tax by adding the service charge to the total.
We''re going to see them on Tuesday to sign the contract so we''ll ask then, but I will appreciate first hand answers too.
 
Well. http://www.boe.ca.gov/pdf/pub61.pdf

If we can figure out what this means. we might be on the right track. I'm thinking it means that it means NO, but I'm only about 51% sure as I don't know how the laws define 'tangible personal property' transfer and if FOOD and BEVERAGE qualify. They are consumables, so that's where the doubt comes from.

"SERVICES — The sale of services where no tangible personal property is transferred, or where the transfer of property is incidental, are not subject to sales and use taxes. Persons providing services are consumers of property used in their business activities. However, persons who engage in service operations are retailers of any supplies or other tangible personal property sold to their customers or clients, and tax applies to gross receipts from such sales. Certain services, however, are defined as sales of tangible personal property. For example, the fabrication of tangible personal property for a consumer is defined as a “sale” even when the consumer provides all the tangible personal property used to fabricate the end product."

This (HA, HA, HA...) sheds some light (or darkness) on the subject. http://www.boe.ca.gov/pdf/reg1501.pdf

OY. I'm too tired to figure this gibberish (lawyer-ish) out tonight. But here's the text, if you are in the mood folks. It sounds like a chicken or egg issue. Is the goal of the contract the PROPERTY, or is the transfer of the property incidental, and the goal of the contact is really the SERVICE. I STILL don't know if food and beverage, since they are consumables, really qualify as property to begin with.
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"The basic distinction in determining whether a particular transaction involves a sale of tangible personal property or
the transfer of tangible personal property incidental to the performance of a service is one of the true object of the
contract; that is, is the real object sought by the buyer the service per se or the property produced by the service. If
the true object of the contract is the service per se, the transaction is not subject to tax even though some tangible
personal property is transferred. For example, a firm which performs business advisory, record keeping, payroll and
tax services for small businesses and furnishes forms, binders, and other property to its clients as an incident to the
rendition of its services is the consumer and not the retailer of such tangible personal property. The true object of
the contract between the firm and its client is the performance of a service and not the furnishing of tangible
personal property. Similarly, an idea may be expressed in the form of tangible personal property and that property
may be transferred for a consideration from one person to another; however, the person transferring the property
may still be regarded as the consumer of the property. Thus, the transfer to a publisher of an original manuscript by
the author thereof for the purpose of publication is not subject to taxation. The author is the consumer of the paper
on which he has recorded the text of his creation. However, the tax would apply to the sale of mere copies of an
author’s works or the sale of manuscripts written by other authors where the manuscript itself is of particular value
as an item of tangible personal property and the purchaser’s primary interest is in the physical property. Tax would
also apply to the sale of artistic expressions in the form of paintings and sculptures even though the work of art may
express an original idea since the purchaser desires the tangible object itself; that is, since the true object of the
contract is the work of art in its physical form."
 
AH HAH!!!

http://www.boe.ca.gov/news/pdf/taxable-caterer-charges.pdf and http://www.boe.ca.gov/pdf/reg1603.pdf (THIS is the one, really).

Okay. So gonna have to read these more carefully but a cursery glance makes it sound like THEY CAN tax for services as they if they are
"mandatory" charges. Again, I could be wrong. Have to actually study these and its 12:30 in the morning right now.

(g) TIPS, GRATUITIES, AND SERVICE CHARGES.
This subdivision applies to restaurants, hotels, caterers, boarding houses, soda fountains, drive-ins and similar
establishments.
An optional payment designated as a tip, gratuity, or service charge is not subject to tax. A mandatory payment
designated as a tip, gratuity, or service charge is included in taxable gross receipts, even if the amount is
subsequently paid by the retailer to employees.
(1) OPTIONAL PAYMENT.
(A) A payment of a tip, gratuity, or service charge is optional if the customer adds the amount to the bill
presented by the retailer, or otherwise leaves a separate amount in payment over and above the actual amount due
the retailer for the sale of meals, food, and drinks that include services. The following examples illustrate transactions
where a payment of a tip, gratuity or service charge is optional and not included in taxable gross receipts. This is true
regardless of printed statements on menus, brochures, advertisements or other materials notifying customers that
tips, gratuities, or service charges will or may be added by the retailer to the prices of meals, food, or drinks:
Example 1. The restaurant check is presented to the customer with the “tip” area blank so the customer
may voluntarily write in an amount, or
Example 2. The restaurant check is presented to the customer with options computed by the retailer and
presented to the customer as tip suggestions. The “tip” area is blank so the customer may voluntarily write in an
amount:
Guest Check
Food Item A $ 9.95
Beverage Item B 3.75
Subtotal $13.70
8% sales tax 1.10
Subtotal $14.80
Tip* _____
Total
Regulation 1603. (Contd.)
7
*Suggested tips:
15%=$2.06; 18%=$2.47; 20%=$2.74; other
If an employer misappropriates these payments for these charges, as discussed in subdivision (g)(1)(B) below, such
payments are included in the retailer’s taxable gross receipts.
(B) No employer shall collect, take, or receive any gratuity or a part thereof, paid, given to, or left for an
employee by a patron, or deduct any amount from wages due an employee on account of such gratuity, or require an
employee to credit the amount, or any part thereof, of such gratuity against and as a part of the wages due the
employee from the employer. (Labor Code section 351.) If this prohibition is violated, any amount of such gratuities
received by the employer will be considered a part of the gross receipts of the employer and subject to the tax.
(2) MANDATORY PAYMENT.
(A) An amount negotiated between the retailer and the customer in advance of a meal, food, or drinks, or
an event that includes a meal, food, or drinks is mandatory.
(B) When the menu, brochures, advertisements or other printed materials contain statements that notify
customers that tips, gratuities, or service charges will or may be added, an amount automatically added by the
retailer to the bill or invoice presented to and paid by the customer is a mandatory charge and subject to tax. These
amounts are considered negotiated in advance as specified in subdivision (g)(2)(A). Examples of printed statements
include:
“An 18% gratuity [or service charge] will be added to parties of 8 or more.”
“Suggested gratuity 15%,” itemized on the invoice or bill by the restaurant, hotel, caterer,
boarding house, soda fountain, drive-in or similar establishment.
“A 15% voluntary gratuity will be added for parties of 8 or more.”
An amount will be considered “automatically added” when the retailer adds the tip to the bill without first conferring
with the customer after service of the meal and receiving approval to add the tip or without providing the customer
with the option to write in the tip. Nonetheless, any amount added by the retailer is presumed to be mandatory. This
presumption may be overcome as discussed in subdivision (g)(2)(C) below.
(C) It is presumed that an amount added as a tip by the retailer to the bill or invoice presented to the
customer is mandatory. A statement on the bill or invoice that the amount added by the retailer is a “suggested tip,”
“optional gratuity,” or that “the amount may be increased, decreased, or removed” by the customer does not change
the mandatory nature of the charge.
This presumption may be controverted by documentary evidence showing that the customer specifically requested
and authorized the gratuity be added to the amount billed.
Examples of documentary evidence that may be used to overcome the presumption include:
1. A guest check that is presented to the customer showing sales tax reimbursement and the
amount upon which it was computed, without tip or with the “tip” area blank and a
separate document, such as a credit card receipt, to which the retailer adds or prints the
requested tip.
2. Guest receipts and payments showing that the percentage of tips paid by large groups
varies from the percentage stated on the menu, brochure, advertisement or other printed
materials.
3. A retailer’s written policy stating that its employees shall receive confirmation from a
customer before adding a tip together with additional verifiable evidence that the policy
has been enforced. The policy is not in itself sufficient documentation to establish that the
customer requested and authorized that a gratuity be added to the amount billed without
such additional verifiable evidence.
Regulation 1603. (Contd.)
8
The retailer must retain the guest checks and any additional separate documents to show that the payment is
optional. The retailer is also required to maintain other records in accordance with the requirements of Regulation
1698, Records.
(h) CATERERS.
(1) DEFINITION. The term “caterer” as used in this regulation means a person engaged in the business of
serving meals, food, or drinks on the premises of the customer, or on premises supplied by the customer, including
premises leased by the customer from a person other than the caterer, but does not include employees hired by the
customer by the hour or day.
(2) SALES TO CATERERS. A caterer generally is considered to be the consumer of tangible personal property
normally used in the furnishing and serving of meals, food or drinks, except for separately stated charges by the
caterer for the lease of tangible personal property or tangible personal property regarded as being sold with meals,
food or drinks such as disposable plates, napkins, utensils, glasses, cups, stemware, place mats, trays, covers and
toothpicks.
(3) SALES BY CATERERS.
(A) Caterer as Retailer. Tax applies to the entire charge made by caterers for serving meals, food, and
drinks, inclusive of charges for food, the use of dishes, silverware, glasses, chairs, tables, etc., used in connection
with serving meals, and for the labor of serving the meals, whether performed by the caterer, the caterer's employees
or subcontractors. Tax applies to charges made by caterers for preparing and serving meals and drinks even though
the food is not provided by the caterers. Tax applies to charges made by caterers for hot prepared food products as
in (e) above whether or not served by the caterers. A caterer who separately states or itemizes charges for the lease
of tangible personal property regardless of the use of the property will be deemed to be the lessor of such property.
Tax applies in accordance with Regulation 1660 Leases of Tangible Personal Property – In General. Tax does not
apply to charges made by caterers for the rental of dishes, silverware, glasses, etc., purchased by the caterer with tax
paid on the purchase price if no food is provided or served by the caterers in connection with such rental.
(B) Caterers as Lessors of Property Unrelated to the Serving or Furnishing of Meals, Food, or Drinks
by a Caterer.
1. When a caterer who is furnishing or serving meals, food, or drinks also rents or leases from a third
party tangible personal property which the caterer does not use himself or herself and the property is not customarily
provided or used within the catering industry in connection with the furnishing and serving of food or drinks, such as
decorative props related solely to optional entertainment, special lighting for guest speakers, sound or video systems,
dance floors, stages, etc., he or she is a lessor of such property. In such instance, tax applies to the lease in
accordance with Regulation 1660.
2. When a person who in other instances is a caterer does not furnish or serve any meals, food, or
drinks to a customer, but rents or leases from a third party tangible personal property such as dishes, linen,
silverware and glasses, etc., for purposes of providing it to his or her customer, he or she is not acting as a caterer
within the meaning of this regulation, but solely as a lessor of tangible personal property. In such instances tax
applies to the lease in accordance with Regulation 1660.
(C) Caterers Planning, Designing and Coordinating Events.
1. Tax applies to charges by a caterer for event planning, design, coordination, and/or supervision if
they are made in connection with the furnishing of meals, food, or drinks for the event. Tax does not apply to
separately stated charges for services unrelated to the furnishing and serving of meals, food, or drinks, such as
optional entertainment or any staff who do not directly participate in the preparation, furnishing, or serving of meals,
food, or drinks, e.g., coat-check clerks, parking attendants, security guards, etc.
2. When a caterer sells meals, food, or drinks, and the serving of them, to other persons such as
event planners, party coordinators, or fundraisers, who buy and sell the same on their own account or for their own
sake, it is a sale for resale for which the caterer may accept a resale certificate. However, a caterer may only claim
the sale as a resale if the caterer obtains a resale certificate in compliance with Regulation 1668. A person is buying
or selling for his or her own account, or own sake, when such person has his or her own contract with a customer to
sell the meals, food, or drinks to the customer, and is not merely acting on behalf of the caterer.
Regulation 1603. (Contd.)
9
3. When a caterer sells meals, food or drinks and the serving of them to other persons who charge a
fee for their service unrelated to the taxable sale, the separately stated fee is not subject to tax.
(D) Sales of Meals by Caterers to Social Clubs, Fraternal Organizations. Sales of meals to social clubs
and fraternal organizations, as those terms are defined in subdivision (i) below, by caterers are sales for resale if
such social clubs and fraternal organizations are the retailers of the meals subject to tax under subdivision (i) and
give valid resale certificates therefor.
(E) Tips, Gratuities, or Service Charges. Tips, gratuities, and service charges are discussed in
subdivision (g).
(4) PREMISES. GENERAL. Separately stated charges for the lease of premises on which meals, food, or drinks
are served, are nontaxable leases of real property. Where a charge for leased premises is a guarantee against a
minimum purchase of meals, food or drinks, the charge for the guarantee is gross receipts subject to tax. Where a
person contracts to provide both premises and meals, food or drinks, the charge for the meals, food or drinks must be
reasonable in order for the charge for the premises to be non taxable.
(5) PRIVATE CHEFS. A private chef is generally not an employee of the customer, but an independent
contractor who pays his or her own social security, federal and state income taxes. Such a private chef, who prepares
and serves meals, food and drinks in the home of his or her customer is a caterer under this regulation.
 
Thank you, Gypsy!!! I can''t imagine how much work that was...It''s not the answer I was hoping for, but at least we now know.
Here, have a drink. You deserve a good night''s rest.

mango-margarita.jpg
 
Thank Choro... not the answer I wanted either, trust me.

It's like a treasure hunt... a breadcrumb trail. It's a PITA, but at least that last provision was written in english and NOT lawyer-ish. Lawyer-ish gives me a headache. LOL.

Thank you for that drink honey. It looks SO yummy!!!

TO ANY ONE LOOKING AT THIS POST.

PLEASE REMEMBER THE ABOVE IS FOR CALIFORNIA ONLY. I copied and pasted from California sources only.

And it's not legal advice. Just some research and conclusions. You should always do your own research and draw your own conclusions, or consult and attorney on your own.
 
Sorry I''m late, but I have your answer (as I am getting married in CA, too). You are taxed on all: food, beverage and service fees. So just add up all your costs, calculate in the service fees and then calculate tax. In other words, there are no breaks =( but CA is worth it. Good luck!
 
Yep, our catering contract (which we just signed, YAY!) had a service charge of 20% of food costs then tax on top of everything.

Kinda sucks, but it would''ve been the same here in Chicago except at 10.5% sales tax
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(Another reason why I''m happy about doing a DW...sort of my way of sticking it to our incompetent local politicians who keep raising taxes so they can keep their aunts, nephews, sister''s boyfriend''s second cousin in high paying govt jobs
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Thank you enfianced and newbie for the confirmation.
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Newbie I had NO IDEA Chicago sales tax was that high! YIKES!
 
Date: 6/22/2008 3:28:14 AM
Author: Gypsy
Newbie I had NO IDEA Chicago sales tax was that high! YIKES!

Yeah, you''re telling me! Right now it''s still 9.5%, but it will go up by 1 percent this fall to make us the highest sales taxed city in the country. Ugh...

I was just looking through some of the previous proposals I received from Chicago caterers and one of them mentioned there''d also be an *additional* tax of 7% or so on all rental items if your event is in the city. Man, California is just looking better and better...(Although I have to say we do have a nice 3% state income tax, so that makes up for it...a little).
 
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