Was a fee to attend a private social event subject to Illinois sales tax when the fee included restaurant or catered food and drinks?

Plain-English summary

A company planned private social events for members of online groups. Sometimes attendees paid a restaurant directly; sometimes the company paid the restaurant and charged each member an event fee; another scenario involved renting a room and hiring a caterer.

IDOR distinguished admission from food and drink. A bare admission ticket was an intangible and was not subject to Illinois sales tax. But an admission ticket or event fee that entitled the customer to food or drink was taxable.

When organization members met at a restaurant, hotel, or similar business and paid for meals or drinks, the food vendor sold directly to the members. That remained true if the organization collected the money and paid the vendor or retained a portion. The tax measure was the amount the vendor received for the tangible personal property furnished.

For catering, the taxable gross receipts included all charges associated with selling food, even separately billed labor, setup, delivery, linens, tables, chairs, dishes, glasses, and flowers. A separate charge unrelated to the food sale, such as a singer or band, was not taxable if separately listed on the invoice and initialed by the customer.

Common questions

Was admission alone subject to sales tax? No. The GIL treated a bare admission ticket as intangible property.

What if the event fee included food or drink? The charge was subject to tax.

Did routing restaurant payment through the organization change the result? No. The restaurant or other meal vendor was still treated as selling directly to the members.

Could a caterer exclude setup or delivery from taxable receipts? No. The GIL treated those food-sale costs as part of the caterer's taxable gross receipts.

Citations and references

• 86 Ill. Adm. Code 130.120, 130.2145, and 130.410
• 35 ILCS 120/1

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2012.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2012/st-12-0024.pdf

Original ruling text

ST 12-0024-GIL 05/18/2012 SALE AT RETAIL
This letter concerns purchases of food and drinks by exempt organizations or their
members. 86 Ill. Adm. Code 130.2145(b). (This is a GIL.)
May 18, 2012
Dear:
This letter is in response to your letter dated August 16, 2011, in which you request information. The
Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are issued by the
Department in response to specific taxpayer inquiries concerning the application of a tax statute or
rule to a particular fact situation. A PLR is binding on the Department, but only as to the taxpayer
who is the subject of the request for ruling and only to the extent the facts recited in the PLR are
correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in the
Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information Letter
(“GIL”) is to direct taxpayers to Department regulations or other sources of information regarding the
topic about which they have inquired. A GIL is not a statement of Department policy and is not
binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to your
inquiry.
The nature of your inquiry and the information you have provided require that we respond with a GIL.
In your letter you have stated and made inquiry as follows:
I spoke to one of your representatives in the Taxpayer Service Center recently and he
suggested I contact your office in order to obtain a ruling for a new client.
This company will be holding social events in various cities in the United States,
including Illinois. They will invite members of their online social groups to these various
events – these events are not open to the public. A typical event might be a happy hour
at a restaurant where the company representative would contract with the restaurant for
certain beverages and food to be provided by the restaurant to the members.
In most cases, the attendees pay their tab for food and drinks directly to the restaurant,
along with the appropriate sales tax.
In a few cases, the representative would pay the restaurant directly for all food and
beverages, including the sales taxes charged by the restaurant.
The members who attend pay a certain amount, say $20 per person to attend the event
and this amount is either collected when they arrive or is prepaid online by the member.
Is the $20 paid by the member to attend the event subject to sales tax or admissions
tax? Is the $20 paid by the member to attend the event subject to sales tax or
admissions tax if it includes any food or beverage (alcoholic)?
If they rented a room and hired a caterer and charged the members to attend that event,
would the answer be the same?
Under what circumstances, if any, would the amount charged to the member for
attending an event be subject to the sales/admissions tax?

ST 12-00024
May 18, 2012
Page 2

Thank you very much for your very able assistance.

DEPARTMENT’S RESPONSE:
The Illinois Retailers' Occupation Tax Act imposes a tax upon persons engaged in this State in the
business of selling tangible personal property at retail to purchasers for use or consumption. See 86
Ill. Adm. Code 130.101. In Illinois, Use Tax is imposed on the privilege of using, in this State, any
kind of tangible personal property that is purchased anywhere at retail from a retailer. See 86 Ill.
Adm. Code 150.101. These taxes comprise what is commonly known as "sales" tax in Illinois.
Generally, the sale of admission ticket is the sales of an intangible. Intangible personal property is
not subject to sales tax. See 86 Ill. Adm. Code 130.120. However, when an admission ticket entitles
a customer to food or drink in addition to attendance at an event, it is subject to tax. See 86 Ill. Adm.
Code 130.2145.
When members of an organization meet at a hotel, restaurant or other place of business where food
or drinks are sold and pay for those items, the hotel, or other vendor of meals, is considered to be
selling such tangible personal property directly to members as users or consumers, and the sales
shall be considered to be taxable. This is true even if the organization collects from the members and
makes payment to the vendor, and even if the organization is permitted to retain a portion of what it
collects for its own purposes. In this situation, the organization is deemed to be acting for the
accommodation of all concerned and is not deemed to be standing in the role of a purchaser and
reseller. The measure of the tax is the amount received by the hotel, etc., for the tangible personal
property that it furnishes. 86 Ill. Adm. Code 130.2145(b).
Retailers' Occupation Tax is based upon the "selling price" of the tangible personal property sold.
Section 1 of the Retailers' Occupation Tax Act defines the term, "selling price," as the "consideration
for a sale valued in money … without any deduction on account of the cost of the property sold, the
cost of materials used, labor or service cost or any other expense whatsoever…." See, 35 ILCS
120/1. As indicated by this definition, a retailer's costs of doing business are not deductible from his
gross receipts. This principle is also articulated in Section 130.410 of the Department's rules. See 86
Ill. Adm. Code 130.410.
As a result, tax is imposed upon a caterer's entire gross receipts from sale, without any deduction on
account of service costs or other overhead costs. A caterer's gross receipts would include all receipts
associated with his sale of food. Such costs would include charges for linens, tables, chairs, dishes,
glasses, flowers, labor, set-up, and delivery. Each of these items is a part of the cost of doing
business as a caterer. It is immaterial that the customer is separately billed for the price of these
items. These costs are costs of doing business as a caterer, just as they would be part of the
overhead expenses incurred by a restaurant owner.
When a caterer makes separate charges to customers for items which are not associated with the
sale of food, such items are not taxable, provided that they are separately listed on the invoice to the
customer and are initialed by the customer. This would be the case, for instance, with charges for
entertainment (singers, bands, and the like).

ST 12-00024
May 18, 2012
Page 3

I hope this information is helpful. If you require additional information, please visit our website at
www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.

Very truly yours,

Richard S. Wolters
Associate Counsel