I am an event producer who partners with banquet spaces to produce dinner theater events in Michigan and Indiana.

The guests pay me for admission, which includes food. I pay the banquet space for the food. The banquet space charges me tax and pays it to the IRS.

Am I under an obligation to charge the guest tax for the sale of food, too? Essentially, does the IRS demand to be paid tax twice for the same food? I am never in possession of the food myself - the banquet staff serves it directly to the guests.

In my research I can't find a clear answer. I did find one document (pertaining to Michigan law) that says only "prepared food" is taxable and defines "prepared food" as "food served in a heated state which is heated by the seller." As I interpret this, it renders the question moot. If I am considered to be selling the food to the guest, it is nontaxable because I (the seller) didn't heat it. If I am not considered to be the seller, then I shouldn't charge tax on it whether it is taxable or not.

Any info anyone else has pertaining to this would help me a great deal.

  • For questions like this, you ought to consult your accountant or tax attorney, not random amateurs on the Internet. – Nate Eldredge May 19 '20 at 16:35
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    But to help get you started: (1) it sounds like you're talking about sales tax, which is paid to the state (or local) government, not to the (federal) IRS. (2) Typically, sales tax need only be paid by the final consumer. If you're buying it to resell, you should be able to get a "resale license" or similar certificate from the state. You show this to the people from whom you're buying the stuff, and then they don't charge you the sales tax. This is the normal way that double taxation is avoided. – Nate Eldredge May 19 '20 at 16:39
  • @NateEldredge your two numbered points taken together imply that final consumers pay sales tax to state and local governments. That is incorrect. – phoog May 20 '20 at 4:17
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    @phoog: Sorry if that was unclear. Final consumers pay the tax. It is collected by the seller who sold the goods to those consumers, and the seller in turn transfers that money to the state. But it is never paid to the IRS. I should probably have written "ultimately paid" in the first sentence. – Nate Eldredge May 20 '20 at 4:20

You can read about tax on prepared food to be consumed on the spot here for Michigan, and this bulletin for Indiana is more specifically tailored for banquets. Generally, sales tax laws don't require you to charge the customer, you just have to pay the required tax and then you can pay the sales tax on behalf of the customer if you want (hence some stores on some days might have a "tax holiday" to encourage business). In both states, retail sale of prepared food to be consumed "there" (e.g. at the table) is subject to sales tax. The ingredients purchased by the preparer are ordinarily not subject to sales tax, which apply only to retail sales. But sometimes food for re-sale is purchased retail and without an exemption via a reseller's license – so yes, sales tax can be charged twice (at least w.r.t. ingredients).

The Indiana bulletin provides an interesting statement that suggests that the question is not simple to answer.

When events are held for which the price of the ticket or admission includes food services as well as entertainment and/or other intangible services, the entire selling price of the ticket is subject to the sales tax unless the price charged for food service is stated separately from the other items.

The first part of this guidance should remind you that unlike the European model, sales tax (VAT) is not part of the sale price, it's something that you add on, to get the "real" sales price. So you need to talk to a couple of attorneys (or one who can operate in both states), to make sure that you're both complying with the tax law but also telling the consumer the right thing, i.e. informing them what the pre-tax and actual price are.

  • "sales tax is not part of the sale price": it can be. Some US retailers offer "tax included" prices, although the practice is rare. – phoog May 20 '20 at 4:19

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