Can a caterer buy paper cups, napkins, tablecloths, and plastic tableware tax-free as items bought for resale?

Plain-English summary

Festive Caterers Inc. asked whether it must pay sales tax on paper cups, napkins, tablecloths, and plastic tableware, arguing they become part of a customer's order and so are bought for resale.

The Department held it depends on the item: food-and-drink packaging is exempt for resale, but utensils and napkins are taxable to the caterer.

• The framework. New York taxes retail sales of tangible personal property (§ 1105(a)) and sales of food and drink by caterers (§ 1105(d)). A "retail sale" excludes property bought for resale or that becomes a physical component part of property sold (§ 1101(b)(4)(i)).
• Exempt: food/drink containers and wrapping. Under § 1115(a)(19) and 20 NYCRR 528.20(d), cups, plates, and containers purchased for resale as a container of food or drink and actually transferred to the customer are bought for resale — the regulation lists sandwich wrappers, cups and lids, food sleeves, disposable plates, and paper bags. The caterer can buy these tax-free with a Resale Certificate (Form ST-120).
• Taxable: napkins and utensils. Napkins, straws, stirrers, and plastic knives, forks, and spoons are not bought for resale and are not packaging materials. They are supplies the caterer uses to provide its catering service — even though their cost is built into the customer's price, they aren't resold "as such or as a physical component part." So the caterer pays sales tax on them as the consumer (Celestial Food of Massapequa Corp. v. State Tax Commission).
• Collect on the catering charge. Festive must also collect sales tax on the total selling price for its catering (except gratuities under 20 NYCRR 527.8(l)).

What this means for you

Draw the line at "container of the food" vs. "used to serve it." Disposable items that hold or wrap the food or drink you sell — cups, lids, plates, sleeves, wrappers, bags — are bought for resale and can come tax-free on a resale certificate. Napkins, straws, stirrers, and plastic cutlery are supplies you consume; you pay tax on those.

"It's baked into the customer's price" isn't the test. The fact that a supply's cost is passed along in what you charge doesn't make it resold. Resale treatment turns on whether the item is actually the container of the food/drink transferred, not on cost recovery.

Charge tax on the whole catering bill. Regardless of how your supplies are taxed, you collect sales tax on the full catering selling price (gratuities aside). Getting the input side right avoids paying tax twice on the containers while still taxing the customer correctly.

Common questions

Q: Can I buy disposable plates and cups tax-free?
A: Yes, when they're purchased for resale as containers of the food or drink you sell and are transferred to the customer — use a Resale Certificate (Form ST-120).

Q: What about napkins, straws, and plastic forks?
A: Taxable to you. They aren't bought for resale or as packaging; they're supplies you use to provide the catering service, so you pay tax on them.

Q: Do I still charge my customers tax on the catering?
A: Yes. You collect sales tax on the total selling price for catering under § 1105(d), except for gratuities.

Citations and references

Statutes, regulation, and case:

• Tax Law § 1105(a) — taxes retail sales of tangible personal property
• Tax Law § 1105(d) — taxes sales of food and drink by caterers
• Tax Law § 1101(b)(4)(i) — retail sale; resale and taxable-service exclusions
• Tax Law § 1115(a)(19) — exempts packaging materials transferred to the purchaser
• 20 NYCRR 528.20(d) — food/drink containers (resale) vs. napkins and utensils (taxable)
• Celestial Food of Massapequa Corp. v. State Tax Commission, 484 NYS2d 509

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1987.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a87_20s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-87(20)S
Sales Tax
May 14, 1987

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S870204B

On February 4, 1987, a Petition for Advisory Opinion was received from Festive Caterers
Inc., 765 Horseblock Road, Farmingville, New York 11738.
The issue raised is whether Petitioner is liable for payment of sales tax on purchases of
various supplies such as paper cups, napkins, table cloths and plastic tableware.
Petitioner maintains its purchases of these items should be exempt from taxation because
they become part of a customer's order and are therefore bought for resale.
Articles 28 and 29 of the Tax Law impose sales tax on the receipts from every retail sale,
except for resale, of tangible personal property ( 1105[a]) and on the receipts from every sale of food
and drink by caterers including any cover, minimum, entertainment and other charge made to
customers ( 1105 [d]).
Section 1101(b)(4)(i) of the Tax Law defines "retail sale" as a sale of tangible personal
property to any person for any purpose, other than (A) for resale as such or as physical component
part of tangible personal property; or (B) for use by that person in performing certain services subject
to tax under subdivision (c) of section 1105 of the Tax Law.
Section 1115(a)(19) of the Tax Law exempts from tax the receipts from retail sales of
"cartons, containers and wrapping and packaging materials and supplies, and components thereof
for use and consumption by a vendor in packaging or packing tangible personal property for sale,
and actually transferred by the vendor to the purchaser."
Regulation Section 528.20(d) provides that
(1) . . . cups, plates and containers for hot and cold drinks purchased for resale as a
container of food or drink of any nature taxed under section 1105(d) of the Tax Law
and actually transferred to the purchaser of such food or drink, are purchased for
resale and thus not subject to sales or use taxes.
(i) . . . [P]ackaging materials which may be purchased under the resale
exclusion of the Tax Law [include, but are not limited to]
(a)
(b)
(c)
(d)
(e)

sandwich wrappers;
cups and lids;
food sleeves;
disposable plates; and
paper bags.

RODERICK G. W. CHU, COMMISSIONER
GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (3/83)

-2­
TSB-A-87(20)S
Sales Tax
May 14, 1987

Consequently, wrapping material and nonreturnable food and drink containers which
Petitioner will transfer to the customer may be bought exempt from tax if the supplier is given a
Resale Certificate (Form ST-120) in proper form.
Regulation Section 528.20(d) further explains:
(2)
Napkins, straws, stirrers, plastic knives, forks, spoons and other similar items
are not purchased for resale as such, nor are they packaging materials or supplies . .
exempted from tax by paragraph (19) of section 1115(a) of the Tax Law. . . .
The latter supplies and utensils are acquired for the Petitioner's use in providing a catering
service pursuant to Tax Law 1105(d) and, even though their cost becomes a factor in determining
the price a customer pays, are not considered to be resold "as such or as a physical component part
of tangible personal property". Thus, these supplies do not qualify for the exclusion from taxation
contained in Tax Law 1101(b)(4)(i) under (A), (see above). (See also Celestial Food of Massapequa
Corp. v. State Tax Commission, 484 NYS2d 509). Furthermore, subparagraph (i)(B) of the
exclusionary provision quoted above, is inapplicable to property bought for use in performing the
transactions taxed under Section 1105(d) of the Tax Law.
Accordingly, Petitioner must pay sales tax on purchases of supplies which are not used for
packaging food and drink, since such items are purchased "at retail" as defined in Tax Law
1101(b)(1). Additionally, Petitioner must collect tax on the total selling price charged to its
customers (except for gratuities as defined in 20 NYCRR 527.8[l]) for catering services. Tax Law
1101(b)3; 1105(d), supra.

DATED: May 14, 1987

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.