California Code of Regulations › Title 18 - Public Revenues › Division 2 - California Department of Tax and Fee Administration- Business Taxes (State Board of Equalization- Business Taxes, See Ch. 6 and 9.9) › Chapter 4 - Sales and Use Tax › Article 8 - Food Products and Meals › Section 1603 - Taxable Sales of Food Products

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Restaurants, Hotels, Boarding Houses,
				  Soda Fountains, and Similar Establishments.
(1) Definitions.
(A) Boarding House. The term "boarding house"
				  as used in this regulation means any establishment regularly serving meals, on
				  the average to five or more paying guests. The term includes a "guest home,"
				  "residential care home," "halfway house," and any other establishment providing
				  room and board or board only, which is not an institution as defined in
				  Regulation 1503 and section
				  6363.6
				  of the Revenue and Taxation Code. The fact that guests may be recipients of
				  welfare funds does not affect the application of tax. A person or establishment
				  furnishing meals on the average to fewer than five paying guests during the
				  calendar quarter is not considered to be engaged in the business of selling
				  meals at retail.
(B) American Plan
				  Hotel. The term "American Plan Hotel" as used in this regulation means a hotel
				  which charges guests a fixed sum by the day, week, or other period for room and
				  meals combined.
(C) Complimentary
				  Food and Beverages. As used in this subdivision (a), the term "complimentary
				  food and beverages" means food and beverages (including alcoholic and
				  non-alcoholic beverages) which are provided to transient guests on a
				  complimentary basis and:
1. There is no
				  segregation between the charges for rooms and the charges for the food and
				  beverages on the guests' bills, and
2. The guests are not given an option to
				  refuse the food and beverages in return for a discounted room
				  rental.
(D) Average
				  Retail Value of Complimentary Food and Beverages. The term "average retail
				  value of complimentary food and beverages" (ARV) as used in this regulation
				  means the total amount of the costs of the complimentary food and beverages for
				  the preceding calendar year marked-up one hundred percent (100%) and divided by
				  the number of rooms rented for that year. Costs of complimentary food and
				  beverages include charges for delivery to the lodging establishment but exclude
				  discounts taken and sales tax reimbursement paid to vendors. The 100% markup
				  factor includes the cost of food preparation labor by hotel employees, the fair
				  rental value of hotel facilities used to prepare or serve the food and
				  beverages, and profit.
(E) Average
				  Daily Rate. The term "average daily rate" (ADR) as used in this regulation
				  means the gross room revenue for the preceding calendar year divided by the
				  number of rooms rented for that year. "Gross room revenue" means and includes
				  the full charge to the hotel customers but excludes separately stated occupancy
				  taxes, revenue from contract and group rentals which do not qualify for
				  complimentary food and beverages, and revenue from special packages (e.g., New
				  Year's Eve packages which include food and beverages as well as guest room
				  accommodations), unless it can be documented that the retail value of the food
				  and beverages provided as a part of the special package is 10% or less of the
				  total package charge as provided in subdivision (a)(2)(B). "Number of rooms
				  rented for that year" means the total number of times all rooms have been
				  rented on a nightly basis provided the revenue for those rooms is included in
				  the "gross room revenue." For example, if a room is rented out for three
				  consecutive nights by one guest, that room will be counted as rented three
				  times when computing the ADR.