When a business sells a combined ticket for a dinner-and-entertainment event (like a murder mystery dinner), does it owe Illinois Retailers' Occupation Tax on the food, and does that change if the caterer already charged tax on the food it sold to the business?

Plain-English summary

A business planning a murder-mystery dinner event asked the Illinois Department of Revenue whether it needed to have its caterer strip out sales tax from the food charge so that the business could instead collect tax on the ticket price, or whether the whole ticket (dinner plus show) could be treated as a nontaxable "service."

The Department explained that caterers are vendors of tangible personal property and owe Retailers' Occupation Tax on their full gross receipts from selling food, with no deduction for service, overhead, linens, dishes, delivery, or similar costs — those are just part of the cost of doing business as a caterer. A caterer's sale is only tax-free if the buyer is purchasing for resale and furnishes an active registration or resale number at the time of purchase; without that, the sale is presumed not to be for resale.

Where a business (like the event host here) bundles food with entertainment into one ticket price, the key question is whether the entertainment is merely an inducement to dine (in which case the whole thing is taxed as a retail food sale) or whether the transaction is genuinely proportioned between taxable food and nontaxable services. If food and entertainment are billed as a single, undifferentiated charge, the entire charge is taxable. Only charges for non-food items (like a band or singers) that are separately itemized on the invoice and initialed by the customer can escape tax.

What this means for you

Caterers

Your gross receipts from selling food are taxable in full — you cannot deduct costs like table linens, chairs, dishes, glassware, flowers, labor, set-up, or delivery, even if you bill those items separately on the invoice. Only non-food charges (e.g., for a band or singer) are excludable, and only if separately stated and initialed by the customer.

Event organizers and dinner-theater/ticketed-event hosts

If you buy catered food and resell it as part of a combined ticket (dinner + show), you are acting as a retailer of that food and must assess Retailers' Occupation Tax on the dinner portion of the ticket — you cannot just treat the whole event as a tax-free "service." Whether the entire ticket price is taxable, or just a proportionate food share, depends on whether the food and entertainment charges are separately stated. A single combined price for both is fully taxable.

Business owners buying food for resale

To buy catered food tax-free for resale, you must give the caterer your active Illinois registration or resale number at the time of purchase, along with a resale certification. Without that, the Department presumes the purchase was not for resale, and the caterer's charge to you remains taxable.

Accountants and tax professionals

This GIL walks through the interplay of 86 Ill. Adm. Code 130.101, 130.210, 130.1405, and 130.2145, plus the "proportion" test from Dinner Theatre Assoc. v. Ill. Dept. of Rev. for mixed food/entertainment charges. Remember this is a GIL — informational only, not binding on the Department.

Common questions

Q: Does a caterer get to subtract its overhead (linens, tables, delivery, labor) before calculating tax?
A: No. A caterer's gross receipts from selling food are taxed in full, with no deduction for service costs or other overhead, even where those costs are separately itemized on the customer's bill.

Q: If our business already paid tax to the caterer, do we still owe tax again when we resell the dinner as part of a ticket?
A: Under the facts described, yes — unless you purchased the food for resale using an active registration or resale number at the time of purchase. Without that number and certification, the sale to you is presumed not to be for resale, and you as the reseller would still need to assess tax on the dinner portion of your ticket sales.

Q: Can we avoid tax on the entertainment part of a combined dinner-and-show ticket?
A: Only if the entertainment charge is separately stated on the customer's invoice and initialed by the customer. If food and entertainment are sold as one undifferentiated price, the Department taxes the entire charge.

Q: How do the Department and courts decide whether a combined food/entertainment charge is taxable?
A: They apply a proportion test: if the business's core offering is food and the entertainment is just an inducement to dine, a retailers' tax applies to the food. Dinner Theatre Assoc. v. Ill. Dept. of Rev., 139 Ill. App. 3d 911 (3d Dist. 1985), illustrates that a single, undifferentiated charge for both is fully taxable.

Q: What is the difference between a GIL and a Private Letter Ruling (PLR) here?
A: A PLR is binding on the Department for the specific requesting taxpayer if the facts are complete and correct. A GIL, like this one, only points the taxpayer to relevant regulations and is not binding on the Department. This letter was issued as a GIL because the nature of the inquiry required a general, regulation-based response rather than a fact-specific binding ruling.

Citations and references

Regulations and case law:

• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax on retail sales of tangible personal property)
• 86 Ill. Adm. Code 150.101 (Use Tax on tangible personal property purchased at retail)
• 86 Ill. Adm. Code 130.2145 (caterers' gross receipts and combined food/entertainment charges)
• 86 Ill. Adm. Code 130.210 (resale exemption requires active registration/resale number)
• 86 Ill. Adm. Code 130.1405 (presumption against resale absent certification)
• Dinner Theatre Assoc. v. Ill. Dept. of Rev., 139 Ill. App. 3d 911 (3d Dist. 1985) (proportion test)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2022.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2022/st22-0022-gil.pdf

Original ruling text

ST-22-0022-GIL 10/13/2022 SALE AT RESALE
Persons engaged in the business of selling meals to purchasers for use or
consumption incur Retailers' Occupation Tax liability on their receipts from those
sales. See 86 Ill. Adm. Code 130.2145. (This is a GIL.)
October 13, 2022

NAME/ADDRESS
Dear Mr. XXX:
This letter is in response to your e-mail dated February 8, 2022, in which you
requested 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:
To Whom It May Concern,
I spoke with a Dept of Revenue person this morning regarding our
business, COMPANY EIN ##-#######. We are going to be hosting a
murder mystery dinner for which we will sell tickets that include the show
and a buffet style dinner. All beverages would be purchased separately by
the patrons. The restaurant that would cater in the food has given us an
estimate that would charge us sales tax on the sale of the food.
The question is, do we have to have the food vendor remove the tax and
then we would collect tax on the ticket? Or do we treat the entire show and
dinner as a "service" since we would have already paid the tax on the food
to the food vendor?
Thank you.
NAME
COMPANY

COMPANY/ NAME
Page 2
October 13, 2022

-###-

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.
Persons engaged in the business of selling meals to purchasers for use or
consumption incur Retailers’ Occupation Tax liability on their receipts from those sales.
Caterers are considered vendors of tangible personal property under 86 Ill. Adm Code
130.2145. When caterers sell food or beverages to consumers, they incur a Retailers’
Occupation Tax liability on their 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 the caterer’s 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).
However, the sale of tangible personal property to a purchaser for the purpose of
resale is not subject to Retailers’ Occupation Tax. Such sales cannot be made tax-free
unless the purchaser has an active registration number or active resale number from
the Department and gives such number to suppliers at the time of purchase. See 86 Ill.
Adm. Code 130.210. Failure to present an active registration or resale number and a
certification to the seller that the sale is for resale creates the presumption that the sale
is not for resale. See 86. Ill. Adm. Code 130.1405.
When a transaction involves both a sale of tangible good and providing a service,
the test for determining the actual nature of the transaction is proportion. If the
taxpayer’s business is the sale of food for which entertainment is only as an inducement
for customers to dine, then a retailers’ tax is assessed. See Dinner Theatre Assoc. v.
Ill. Dept. of Rev., 139 Ill. App. 3d 911 (3d Dist. 1985).

COMPANY/ NAME
Page 3
October 13, 2022
When a single charge is made for both entertainment and food and the charge
for food is not separately stated on the customer’s bill, the entire charge is subject to
tax. For example, when a dinner theater charges $50 for a show and includes food and
beverages, the entire $50 is subject to tax unless a separate charge is made for the
food and beverages. See 86 Ill. Adm. Code 130.2145.
Based on the limited information provided, a sale may be exempt from Retailers’
Occupation Tax and Use Tax if the purchaser provides the seller a certificate of resale
at the time of the sale. If a person is in the business of selling tangible personal
property at retail and sells tickets for dinner and entertainment as an inducement for
customers to patronize the person’s business, then Retailers’ Occupation Tax should be
assessed on the dinner. Additionally, how the dinner and entertainment prices are
listed on the tickets will determine the amount of the retailers’ tax liability.
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,

Kimberly Rossini
Associate Counsel
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