Texas Comptroller of Public Accounts STAR System
200702942L
February 7, 2007
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RE: Free Meals
Dear **************:
Thank you for your email inquiring about the taxability of free meals given to
employees who work at your restaurant. You stated that the meals are provided
before, during or after their shifts. In the alternative, you give them a card
containing a monetary value so that they can use it at their convenience.
Meals and beverages furnished to employees free of charge are taxable to a
restaurant owner only to the extent tax would have been due on the original
purchase price of the food or drinks from suppliers. Even if you hold a mixed
beverage permit, complimentary alcoholic beverages are not resold and use tax,
as provided by Chapter 151 of the Texas Tax Code, is due on the purchase price
of taxable ingredients of the complimentary beverage.
With respect to gift cards, the tax responsibilities of a restaurant are pretty
straightforward and simple. The actual sale or give-away of gift cards is not
subject to Texas sales or use tax or the Texas mixed beverage tax since the
card represents an intangible – the “right” to a future purchase. Instead, tax
is calculated when a card is redeemed. Because the card will be redeemed at
the employee’s convenience, the redemption is not eligible for the exception
noted in Rule 3.293(h)(7). At the time of the card redemption, the portion
attributable to the sale of mixed beverages would be subject to the mixed
beverage gross receipts tax and the portion attributable to food would be
subject to sales tax.
This opinion is based on the information presented. If there are additional or
different facts, the opinion could change.
I hope this answers your question. A complete set of rules, our publications,
forms and the entire text of the Tax Code are available through the
Comptroller’s website at http://www.window.state.tx.us. You may find the rules
by first clicking on "Sales Tax" under the Quick Links on the left side of the
page and then by clicking on "Rules" at the top of the next web page. You can
also peruse “Publications” or “Statutes.”
Our goal is to provide you with prompt, professional service. Please take a
moment to complete our on-line survey at
http://aixtcp.cpa.state.tx.us/surveys/tpsurv2/index.html.
If you have any questions or need more information, you may reply by email
directly to
tax.help@cpa.state.tx.us or call me toll-free at 1-800-531-5441, extension
6-2065. I am always available to help you.
Sincerely,
James P. Mathieson
Tax Policy Division
ACCESSION NUMBER: 200702942L
SUPERSEDED: N
DOCUMENT TYPE: L
DATE: 2007-02-07
TAX TYPE: SALES