Revenue Administrative Bulletin 1991-19
Approved:November 27, 1991
TAX BASE USED IN DETERMINING SALES TAX LIABILITY ON FOOD AND BEVERAGES SERVED AT FUNDRAISING EVENTS
(Replaces Revenue Administrative Bulletin 1989-63)
RAB-91-19. This bulletin restates the substantive content of Revenue Administrative Bulletin 1989-63, but deletes the list of Treasury Department field offices found at the end of that bulletin. Organizational changes have made reference to specific field offices impractical. The list is replaced by a general reference to the most recent Revenue Administrative Bulletin listing Department of Treasury field offices.
The purpose of this bulletin is to clarify the tax base used in determining the amount of sales tax due on food and beverages served at fundraising events.
Food and beverages served at fundraisers are sales of prepared food for immediate consumption and are subject to sales tax. (See MCL 205.52(l); MSA 7.522(l) and MCL 205.54g(l)(a); MSA 7.524(7)(1)(a). See also Department of Treasury Sales and Use Tax Rule, 1979 AC, R 205.136(5), and Revenue Administrative Bulletin 1988-42.)
Note: If food is purchased from a caterer or other preparer and sales tax is paid on the purchase, then there is no further tax obligation on the food. The same tax treatment applies to alcoholic beverages if the charge for the beverage is included in the admission fee or donation and there is no further charge, such as a cash bar arrangement.
Sales by a nonprofit organization are not exempt simply because of the nonprofit status of the organization. Therefore, when food is provided by a nonprofit organization at an event where an admission fee is required or a donation is made, the food is subject to sales tax as provided in this bulletin.
Determination of Tax Base
The tax base is the fair market value of the food sold. Usually the fair market value is the price of admission or a donation to attend the fundraiser or to purchase and prepare the food. If the admission or a donation exceeds the fair market value of the food or drink, fair market value may be determined by any reasonable method. When food is provided by a caterer, the sales tax is paid by the caterer, who may add the tax to the customer's bill. [MCL 205.73; MSA 7.544] If the fundraising organization claims a sales tax exemption for resale on the caterer's purchase, then the sales tax must be paid by the organization.
The sale of alcoholic beverages at a fundraiser is taxable. Sales tax is due on the total amount of the sales of beer, wine, and liquor. (See Department of Treasury Sales Tax Rule, 1979 AC, R 205.58.) If an organization pays sales tax on alcoholic beverages when purchased and provides the alcoholic beverages at the fundraiser at no additional charge to attendees, then no additional sales tax is owed. If at the fundraiser there is a charge for alcoholic beverages, sales tax is due on the total gross proceeds of the beverage sales (and a credit may be taken for any sales tax paid when the organization purchased the alcoholic beverages).
Prepackaged items (such as candy bars, potato chips, ice cream, popcorn, nuts or cans or bottles of soda) sold at various public events, facilities and places including theaters, fairs, recreation centers, athletic events, parks, and other similar public events, facilities or places, are taxable as prepared food for immediate consumption. [MCL 205.54g; MSA 7.525(7)] For periods before January 1, 1990, the Department of Treasury will not assess tax on sales of these items if an organization did not charge or pay sales tax on these items.
- Tickets are sold to a political fundraiser for $25.00 per person. Meals provided at the fundraiser are purchased from a caterer at a charge to the organization of $10.00 per plate, and the organization did not claim a sales tax exemption for resale. The sales tax base for the food is the $10.00-per-plate charged. The sales tax is paid by the caterer, who may add the tax to the bill or indicate on the bill "Michigan State sales tax included." The organization purchased beer and wine for the fundraiser and paid sales tax on their purchase. When the beer and wine are served at no additional charge to the attendees, no additional tax is due. If there is a "cash bar," the sales tax is due on the total gross proceeds of the beverage sales.
- A church holds an "all-you-can-eat" pancake supper. Tickets are sold for $5.00 per person for adults, $2.75 per person for those under 12 years of age. Tax is due on the ticket price charged which approximates the fair market value of the food.
- A booster club sells hot dogs, bags of chips, candy bars, and cans of soda at a school athletic event. Tax is due on the total gross proceeds from the sales of these items.
- A nonprofit organization holds a fundraising fashion show where dessert and coffee will be served. Tickets are available for $15.00. Sales tax will be due on the fair market value of any food or drink served. The fair market value may be determined by quotations from caterers or other reasonable method.
- A boy scout troop sells candy bars door-to-door. These sales are not food for immediate consumption and are not subject to tax as the candy bars are not sold at an event or public facility or place.
There are alternate methods for remitting tax on fundraising sales:
- Groups currently holding a sales tax license may remit the tax on their current sales tax return.
- Groups that hold fundraising events repeatedly for specific months of the year may obtain a seasonal sales tax license from the Treasury Department and remit tax on their sales tax return.
- Groups conducting a one-time fundraising event may remit their sales tax on a concessionaire return (form C-5603a). These returns may be obtained by contacting the nearest Treasury Department field office. (See the most recent Revenue Administrative Bulletin listing these offices for their addresses and hours of operation.)