Legal Question in Tax Law in New Jersey

How is a Caterer supposed to charge NJ Sales Tax on the Food and Services provid

A NJ Caterer is going to supply Food, Drink and Services at his facility for a Party that we are hosting @ a cost of $10,000.

When we reviewed the cost calculations the 18% Gratutiy charge ($1,800) was added to the Total of the Food, Drink and Service charges ($10,000 + $1,800 = $11,800). Then the Caterer computed the 6% Sales Tax amount ($11,800 @6% = $708) against the combined Food + Gratuity Total bringing the total bill to $12,508.

We feel that the Sales Tax amount should only be computed against the Food, Drink and Service charge total which yields a lower Sales Tax Charge and lower total bill ($10,000 + $600 + $1,800 = $12,400). Is this legal to charge Sales tax on the Gratutity amount? Please provide the NJ Sales Tax code reference in your response.


Asked on 10/31/02, 9:39 pm

1 Answer from Attorneys
Walter LeVine Walter D. LeVine, Esq.

Re: How is a Caterer supposed to charge NJ Sales Tax on the Food and Services pr

Per the NJ Sales Tax Guide (Bulletin S&U-4, Revised 3/00), Page 10 - Catering Services are taxable transactions. However, Tips and Gratuities, if separately stated and paid directly to the employee, are exempt. Issue seems to be how and by whom the tips are paid. If paid by you they are exempt, if included in the caterer's bill to you and paid by the caterer to the employees, it appears to be properly subject to tax. This differs from using a charge card and including a tip (like when you go to a restaurant), as the tip is added and considered as being paid directly by you. I suggest you make an arrangement to pay the employees of the caterer directly, at the function, if they will allow you to do this.

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Answered on 11/01/02, 11:10 am


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