New York State Budget Bill Offers Resale Sales Tax Exemption for Restaurateurs and Caterers

    The recently enacted New York State 2018-2019 Budget Bill changed the sales and use tax rules concerning restaurants, caterers and similar establishments.  Effective on or after June 1, 2018, certain sales to a qualified reseller of otherwise taxable food and beverage items by restaurants, caterers, and similar establishments can be made exempt from sales tax.  

    The resale exemption applies only if the purchaser provides the seller with a completed Form ST—120 (Resale Certificate), which has been revised to reflect the new rules. Qualified resellers must complete Form ST-120 and check off box “C” within Part 1 of the form and present it to restaurants, caterers and similar establishments when making these types of purchases.  

    However, prior to June 1, 2018, purchasers of taxable food and beverages from restaurants, caterers, and similar establishments were still required to pay the sales tax to the vendors and subsequently apply for a refund or credit of the tax by filing Form AU-11, Application for Credit or Refund of Sales or Use Tax when those items are resold.   An AU-11 is still required if those purchases were resold after June 1, 2018.  

    The New York State Department of Taxation and Finance has issued TSB-M-18(1)S (5/25/2018), which highlights the new rule and includes the following examples of purchases from restaurants, caterers and similar establishments that could qualify for the resale exemption:  cooked dishes, premade sandwiches, deli or sandwich platters, vegetable platters, soups, hot coffee, and  meals purchased from restaurants for resale, and subcontracted catering services.

    Below is a hypothetical example that demonstrates resale sales tax exemptions:

    ABC Caterers, a New York State company, wishes to purchase “prepared food” from 123 Restaurant, also a New York State company, to provide catering services for their New York customer.

    Before June 1, 2018 – 123 Restaurant was required to charge New York sales tax to ABC Caterers.  ABC Caterers can take a credit for the New York sales taxes paid to 123 Restaurant. 

    June 1, 2018 and moving forward – ABC Caterers issues a fully-completed Form ST-120 (Resale Certificate) to 123 Restaurant.  123 Restaurant does not collect NY sales tax from ABC Caterers.

    For additional information on food and beverages that are eligible to be purchased for resale or any assistance with resale certificates, refund applications, or New York State sales tax, please contact a member of the CohnReznick State and Local Tax Team. 

    Subject matter expertise

    • cindy mcloughlin
      Contact Cindy Cindy+McLoughlin
      Cindy McLoughlin

      CPA, Managing Partner, Consumer, Hospitality, and Manufacturing Practice

    • corey rosenthal
      Contact Corey Corey+Rosenthal
      Corey Rosenthal

      JD, Principal, Practice Leader, State and Local Tax (SALT) Services

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    Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.