Must a club catering a member's party charge sales tax on a separately stated fee for musicians it arranged for the party?

Plain-English summary

The River Club of New York, Inc., a private social and athletic club, hosts private parties for its members and is often asked to provide the food and drink. Sometimes a member also asks the club to arrange professional musicians; the club engages and pays the musicians and, "as a convenience to the member," lists that expense as a separate item on the bill. It asked whether it must collect sales tax on that separately stated music charge.

The Department held the club must collect tax on the whole bill, including the musicians' fee.

• Caterers' food-and-drink receipts are taxable — including add-on charges. Section § 1105(d)(i) taxes receipts from food and drink sold by restaurants and caterers, and expressly includes any "cover, minimum, entertainment or other charge" made to the customer.
• All of a caterer's charges are taxable. Under 20 NYCRR § 527.8(f), all charges by a caterer who provides food or drink plus serving or related services are taxable — and the regulation's own example lists music among the taxable charges billed by a caterer.
• Providing food, drink and related services makes the club a caterer. Because the club furnishes the food and drink and related services after delivery, it is acting as a caterer, so it must collect tax on the total charged to the member.
• "Separately stated" and "reimbursed expense" don't help. Billing the musicians as a separate convenience item doesn't exclude it. Reimbursed expenses of a caterer are part of the taxable receipt (Stouffer Management Food Service v. Tully, which effectively overruled contrary earlier decisions, Ocean Catering and Starlite Caterers).

What this means for you

When you cater, the whole bill is generally taxable — not just the food. New York's caterer rule sweeps in cover, minimum, entertainment, and "other" charges. Line items you add to a catering bill — music, decorations, staffing, and similar — ride along with the taxable food-and-drink receipt.

Calling a charge a "separately stated reimbursement" won't carve it out. Passing an expense through to the customer "at cost" as a convenience doesn't make it non-taxable. If you (the caterer) arrange and bill it as part of the event, it's part of your taxable receipt.

"Who arranges and bills it" is the pivot. Here the club engaged and paid the musicians and billed the member, so the fee was the caterer's taxable charge. The result can differ where the customer independently hires and pays a performer directly, outside the caterer's bill — but that's not what happened here.

Common questions

Q: We cater parties and arrange the band, billing it separately. Is the music charge taxable?
A: Yes. As a caterer, your food-and-drink receipt includes entertainment and other charges under § 1105(d)(i), so tax applies to the total — including a separately stated music fee you arranged.

Q: We only pass the musicians' cost through at no markup, as a convenience. Does that change it?
A: No. Reimbursed caterer expenses are part of the taxable receipt (Stouffer v. Tully). Separately stating it as a convenience doesn't exclude it.

Q: What if the customer hires and pays the performer directly?
A: That's a different arrangement. This opinion covers a charge the caterer arranges and bills; a fee the customer pays a performer directly, outside the caterer's bill, isn't addressed here.

Citations and references

Statutes and regulations:

• Tax Law § 1105(d)(i) — tax on food and drink sold by restaurants and caterers, including cover, minimum, entertainment or other charges
• 20 NYCRR § 527.8(f) — all charges by caterers (including music) are taxable

Other authorities referenced:

• Stouffer Management Food Service, Inc. v. Tully, 98 Misc. 2d 1128, aff'd 69 A.D. 2d 1023 (reimbursed expenses are taxable), overruling Matter of Ocean Catering Corp. (Dec. 29, 1970) and Matter of Starlite Caterers, Inc., TSB-H-79(7)S
• Matter of Farrell Lines Incorporated, TSB-H-83(53)S

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1983.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a83_35s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-83(35)S
Sales Tax
July 25, 1983

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S820817A

On August 17, 1982 a Petition for Advisory Opinion was received from The River Club of
New York, Inc., 447 East 42nd Street, New York, New York 10022.
The issue raised is whether a social or athletic club must collect sales tax from a member on
a charge for engaging professional musicians to perform at the member's private party, where such
party is catered by the club and where such charge is separately stated on the bill presented to the
member.
Petitioner, a private social and athletic club, has facilities which are used by individual
members for private parties. Petitioner is frequently asked by the member planning a private party
to provide the food and drink for the party. On occasion a member desiring to have professional
musicians entertain at his private party will ask Petitioner to assist in making the necessary
arrangements. Petitioner contends that when so asked Petitioner will engage the professional
musicians on behalf of the member. Petitioner also contends that, "as a convenience to the member,"
Petitioner will pay the musicians and state the expense as a separate item on the bill presented to the
member.
Section 1105(d)(i) of the Tax Law imposes a tax on: "The receipts from every sale of beer,
wine or other alcoholic beverages or any other drink of any nature, or from every sale of food and
drink of any nature or of food alone, when sold in or by restaurants, taverns or other establishments
in this state, or by caterers, including in the amount of such receipts any cover, minimum,
entertainment or other charge made to patrons or customers " (Emphasis added).
Section 527.8(f) of the Sales and Use Tax Regulations provides, in part, as follows:
"Sales by caterers. (1) All charges by caterers selling food or drink who provide serving or
assistance in serving, cooking, heating or other services after delivery, are taxable.
...
Example 1: A vendor has contracted to cater a wedding party at a private hall. The caterer
will furnish food and drink, music, kosher supervision, bartenders, waiters and waitresses,
and coat checking all of which will be billed by the caterer. All the charges are taxable."
When Petitioner provides food and drink for a member's private party, and provides related
services after delivery, Petitioner is acting as a caterer. Accordingly, pursuant to the provisions of
Section 1105(d)(i) of the Tax Law, Petitioner must collect sales tax on the total amount charged to
the member, including the charge for the professional musicians. See in this regard Stouffer
RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-83(35)S
Sales Tax
July 25, 1983

Management Food Service, Inc. v. Tully, 98 M. 2d 1128, aff'd 69 A.D. 2d 1023, which held fees paid
to a caterer constituting reimbursements of expenses to be subject to tax. This decision effectively
overruled two contrary, earlier Tax Commission decisions, Matter of Ocean Catering Corp, State Tax
Commission, December 29, 1970, and Matter of Starlite Caterers, Inc., State Tax Commission,
October 2, 1978, TSB-H-79(7)S, insofar as these decisions may be understood to have held such
reimbursed expenses not to constitute taxable receipts. It is to be noted that the Stouffer decision has
been followed in a recent Tax Commission hearing decision, Matter of Farrell Lines Incorporated,
State Tax Commission, October 6, 1982, TSB-H-83(53)S.

DATED: June 27, 1983

s/FRANK J. PUCCIA
Director
Technical Services Bureau