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Revenue Administrative Bulletin 1991-19Approved: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.
There are alternate methods for remitting tax on fundraising sales:
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