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Catering and Sales Tax

Updated on June 17, 2012
InColorado, The sale of meals and beverages is subject to sales tax and any person making such sales must acquire a sales tax license and collect sales tax based upon the total consideration paid thereon. Generally this means that restaurants, cafes, lunch counters, hotels, drugstores, social clubs, nightclubs, cabarets, resorts, snack bars, caterers, carryout shops, and other like places of business at which prepared food is regularly sold do not qualify for the food for home consumption exemption under C.R.S. 39-29-707. A business that provides meals and beverages must collect tax at the time of purchase, but a question recently came up. At most restaurants, the tax is collected at the place of business, but what about a caterer? Where do they collect the tax, at the place of business or at the event location? And while there doesn’t seem to be a clear cut answer, here’s what I came up with.

Most caterers I spoke to calculate the tax at the delivery address. They argue that all they do is deliver the food and, as with other deliveries, the tax collected is only the jurisdictions common to both the place of business and the delivery address. But I would challenge this.

A business is responsible for collecting tax for any jurisdiction where they have a significant business presence. For example, Company A has two branches, one in Lakewood and one in Denver. A customer in Aurora calls and orders a new table to be delivered and the table is only available from the Lakewood store. Company A would collect state tax, RTD/CD special district taxes, and possibly county depending on exact addresses. If the customer called for the same table but lives in Denver, the company would have to collect Denver taxes as well, even though the delivery comes from Lakewood, because they have a significant business presence.

Back to our caterer then. Catering is rarely a case of just dropping off food. More often it involves delivery, set-up, serving and clean-up. In essence, the caterer is bringing the restaurant to the event. I would argue that this creates enough of a presence to qualify the business to have nexus in that tax jurisdiction. And according to a Q&A on the State of Colorado website, this interpretation would be correct. Washington and other states have similar rules, though in those states it’s a little more clearly stated in the statutes or regulations. Colorado will have to clarify this so that all caterers are on the same page.


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