LR 8267
Taxability of Catering Services
September 25, 2023
Dear Applicant,
This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated July 28, 2023.
The facts as presented in your letter ruling request and subsequent phone call are summarized as follows:
Applicant is a restaurant and tenant of a hotel. In addition to its restaurant services, Applicant also provides catering services to the hotel. The hotel contracts with banquet groups and Applicant provides the meal and beverage service to the banquet guests. Applicant bills the hotel directly, not the banquet guests, and pays the sales tax to the State.
After the hotel changed ownership, the new owners presented Applicant with a completed Exemption Certificate Form 149 and requested that Applicant stop collecting sales tax on their sales of catering services to the Hotel, because the Hotel would collect the tax owed from the customer in a subsequent transaction.
ISSUE:
Is Applicant responsible for collecting and remitting applicable sales and use tax on their sales of catering services to the hotel?
RESPONSE:
Yes. Applicant is responsible for collecting and remitting applicable sales and use tax on their sales of catering services to the hotel.
Section 144.020.6 RSMo, provides:
(6) A tax equivalent to four percent on the amount of sales or charges for all rooms, meals and drinks furnished at any hotel, motel, tavern, inn, restaurant, eating house, drugstore, dining car, tourist cabin, tourist camp or other place in which rooms, meals or drinks are regularly served to the public. The tax imposed under this subdivision shall not apply to any automatic mandatory gratuity for a large group imposed by a restaurant when such gratuity is reported as employee tip income and the restaurant withholds income tax under section 143.191 on such gratuity;
Applicant's catering services and charges associated with furnishing meals are taxable sales. Therefore, they are subject to tax.
Additionally, Section 144.018.3 RSMo, provides:
For purposes of subdivision (6) of subsection 1 of section 144.020, a hotel, motel, tavern, inn, restaurant, eating house, drugstore, dining car, tourist cabin, tourist camp, or other place in which rooms, meals, or drinks are regularly served to the public shall remit tax on the amount of sales or charges for all rooms, meals, and drinks furnished at such hotel, motel, tavern, inn, restaurant, eating house, drugstore, dining car, tourist cabin, tourist camp, or other place in which rooms, meals, or drinks are regularly served to the public. Any subsequent sale of such rooms, meals, or drinks shall not be subject to tax if the initial sale was an arm's length transaction for fair market value with an unaffiliated entity. If the sale of such rooms, meals, or drinks is exempt or excluded from payment of sales and use taxes, the provisions of this subsection shall not require the hotel, motel, tavern, inn, restaurant, eating house, drugstore, dining car, tourist cabin, tourist camp, or other place in which rooms, meals, or drinks are regularly served to the public to remit tax on that sale.
Pursuant to section 144.018.3, RSMo, Applicant shall remit tax on the amount of sales or charges for meals or drinks served to the public.
Applicant and its partner hotel would rather the hotel bill the customer for the amount of tax in the subsequent transaction. However, section 144.018.3 RSMo, clearly states that any subsequent sale of meals or drinks are not subject to tax if the initial sale was an arm's length transaction for fair market value with an unaffiliated entity. Applicant and the hotel contracted for their catering services in an arm's length transaction for fair market value, therefore, the subsequent sale of the food to the guests is not subject to tax.
Therefore, Applicant is responsible for collecting and remitting tax on its sales of food and drinks to the hotel in conjunction with its catering services.
This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.
Should additional information be needed, please contact Legal Counsel J. Ross Shelton, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.
Sincerely,
Wayne Wallingford