Event Planners:
Event planners normally have a combination of taxable and nontaxable services. The taxability of charges for event planning services depends on factors such as whether the services are provided by a caterer in connection with the sale of food, whether the services are provided by a facility or venue providing taxable amusement services in connection with an event, whether the event is held at a venue owned or operated by the event planner and the type of contract between the event planner and the client.
Event Held at Venue Owned or Operated by the Event Planner, or that is the Employer of the Event Planner: A venue owned or operated by an event planner, or that is the employer of the event planner, may include amusement parks, theme parks, athletic facilities, restaurants, banquet halls, party rooms and other such locations.
If food is prepared and served or otherwise provided by the venue hosting the event, tax is due on the total amount charged to the customer, including the event planner’s fee and charges for such items as entertainment, parking, security, or transportation, even if separately stated in the invoice provided to the customer. The venue is considered a food service operator and the provisions concerning caterers found in Rule 3.293(k) and outlined above apply.
If food is not provided by the venue where the event is held, the taxability of the event planner’s charges will be determined by the type of event and the type of contract with the client. For example, event planning services provided by a venue selling taxable amusement services, such as an amusement or theme park, are taxable in total because the fee charged to clients is connected to the fee paid in order to secure the admission privilege for an individual or a group of individuals to the amusement park. See Comptroller Rule 3.298, “Amusement Services”.
However, a fee charged by a venue for event planning services provided for arranging a conference or meeting when food or admission to an amusement service is not included is not subject to sales tax.
Venues hosting parties, conferences, or other events must pay sales tax to suppliers at the time of purchase on the purchase of all consumables, all equipment, and replacement parts for equipment used to provide the service and operate the facility. Texas use tax is due on items purchased, leased, or rented from an out of state supplier and used in Texas and the venue is responsible for accruing and remitting tax on such items if the tax is not collected by the seller. Examples of items that are taxable to the venue include audio video equipment, margarita machines, tables, chairs, tablecloths, kitchen equipment, ice sculptors, moonwalks, piñatas, and decorations.
The venue may purchase tax-free any items that are given to the client or the guests as part of a taxable event by issuing a resale certificate to suppliers. Examples of qualifying items include cellophane bags and prizes for “goodie” bags, souvenir matchbooks, notepads and pens and floral arrangements
or decorations that the client or guests may take home with them. Tax is due, however, on the same type of items if given to guests or clients as an incidental part of a nontaxable event, such as pens or notepads provided to attendees at a meeting.
Type of Contract:
The type of contract between the planner and client is also a factor for determining the taxability of event planning services.
Agency Agreement:
An event planner may act as the agent of a client. This means that the event planner is authorized by the client to make purchases of items and services on behalf of the client.
When acting as an agent, the event planner cannot mark up the price of the items purchased and billings to the client for the purchases must reflect the actual amount paid to suppliers for the item, including sales and use tax if applicable. If the event planner purchases items on behalf of a client, the
event planner must pay tax to the seller for taxable items. Subsequent billings to the client must reflect the actual price paid and any tax must be clearly shown as a “tax reimbursement.” Tax is not due on charges for planning services that are separately stated and not calculated on a percentage of the items billed to the client.
An event planner will be considered an agent of a client if the event planner discloses to suppliers that it is acting as agent for the client designated on a purchase order or in some other written documentation and maintains accounting records and invoices which evidence that the billing to its clients, except for service charges, is identical to that paid to suppliers.
When an event planner acts as an agent for a customer in acquiring taxable items, the event planner may not issue a resale certificate to a supplier in lieu of tax. The event planner should pay or accrue tax at the time of the purchase and then bill the client for the exact amount of the purchase, including the tax. Payment received from the client is considered reimbursement for the purchases and no additional tax is due provided that the invoices or receipts issued by the event planner to the customer are clearly marked with a statement indicating that tax was paid on all taxable items purchased. A handling or service fee charged by the event planner to the client for a reimbursable purchase is not taxable as long as the fee is separately stated and is not based or calculated on the charge for the item.
Under an agency agreement, if an event planner makes arrangements with a third-party restaurant or caterer (as an agent of the client) to provide meals or food for an event, the restaurant or caterer must collect sales tax on its charges to the customer or the customer’s agent for the taxable meals it provides. The event planner may not give a resale certificate for the purchase of meals or food.
“Turn-key” Contracts:
Under a “turn-key” or lump sum contract, an event planner charges a client one total amount for all goods and services provided, including such items as consultation, set up, delivery and administrative services.
A lump sum charge for event planning services provided in connection with an event where food is served, such as a banquet, party, wedding reception or where a taxable amusement is provided is taxable.
Event planner as a caterer (turn-key contracts)
If an event planner prepares and serves food at an event, the event planner is considered a caterer and is required to collect tax on the total amount charged to the client, including charges for consultation, the event facility and any items used by the client, such as tables, chairs and tablecloths. See Comptroller Rule 3.293(k) and the information about catering above.
Under a turn-key contract, the event planner is the consumer of all services and items purchased, leased or rented for the event. The event planner must pay tax to suppliers when purchasing taxable items such as decorations, equipment and consumable supplies, parking services, security services and cleaning services. An event planner operating under a turn-key contract may not issue a resale certificate when making these purchases. The event planner may issue a resale certificate when purchasing items that will be transferred to the customer. For example, an event planner may purchase catering services tax-free for resale when billing their client under a turn-key or lump sum contract. The event planner must then collect tax on the entire amount charged to the client.
Meetings (turn-key contracts)
A charge to a customer for a turn-key contract for event planning services provided for a nontaxable event such as a meeting or convention is not taxable. Snacks or beverages provided at a meeting or convention will not render the event taxable if the charge attributable to the food or beverage service does not exceed 5 percent of the total charge for the event. The event planner is responsible for paying tax to the supplier of the incidental food or beverage service and is not required to collect tax from the customer.
For example, assume an event planner is hired to coordinate a meeting by arranging for the facility, tables, chairs, audio video equipment and a beverage service. The total amount charged to the client for the service is $1000.00. The event planner’s normal selling price for a beverage service is $50.00. Since the amount attributable to the beverage service is 5 percent or less of the total contract amount, the entire charge to the client is not taxable. The event planner is considered the consumer of the beverage service and is responsible for paying the tax to the supplier.
Separated Contracts:
Under a separated contract, an event planner separately states all charges to the client. The event planner is considered the seller of the items and services provided and must collect tax from the customer on the total amount charged for each taxable item. The tax rate must be applied to the agreed contract price of the items, or to the price of the items to the event planner, whichever is greater, including any associated charges such as transportation or delivery.
However, a separately stated charge for event planning services such as consultation or administration is not taxable if the fee is not directly connected to, or calculated on, the sale of a taxable item.
All charges related to providing or serving food or beverages, or providing other taxable services or items, are taxable to the client. These include charges for the facility, servers, tables and chairs, table cloths and audio visual equipment. Charges for parking, security services, decorations, invitations and clean up are also taxable items. The event planner must collect tax from the customer on the total amount charged for such services even if separately stated from the charge for food or beverages.
An event planner operating under a separated contract may issue a resale certificate when purchasing taxable items that will be transferred to the client or the guests at the event. Examples include such items as souvenir matchbooks, paper napkins, food provided by a third party caterer and floral arrangements or other decorations that the client or guests may take with them. An event planner operating under a separated contract may also issue a resale certificate when purchasing non-reusable, consumable items such as crepe paper, candles, and balloons. In addition, event planners operating under a separated contract may issue a resale certificate when purchasing taxable services such as security, parking and cleaning provided at an event. Sales tax should be collected on the entire amount charged to the customer for such items.
However, the event planner is responsible for paying or accruing tax on all equipment purchased, leased or rented for use during or in preparation for an event and on any taxable services that are directly used by the event planner. Examples include such items as computers, printers, graphic arts, margarita machines, audio visual equipment, moonwalks and data processing services. The event planner may not issue a resale certificate when purchasing such items, even if the planner separately states a charge for the equipment to the customer.
The event planner must also pay or accrue tax at the time of purchase on decorations, floral arrangements and similar items used during an event that remain the property of the event planner after the event. Examples include candle holders, arches and trellises, carpet runners and portable dance floors.
Entertainment:
Separately stated charges for entertainment such as a disc jockey, band or singer are not taxable unless included as part of a contract with a venue hosting an event. For example, a charge for a clown to appear at a birthday party is not taxable. However, if an entertainment venue such as a party room hires a clown to appear at a party, the party room must collect tax on the entire charge to the customer, including the portion attributable to the clown performance. The charge made by the clown to the event planner or venue remains nontaxable.
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