Catering has been a huge help for anyone looking for a place to enjoy an event and food or products to be served. It varies in different foods, like catering treats, cultural cuisines, fine dining, and many other possibilities. It also can be in different forms of themes, like the traditional function rooms or halls, events place, beach, and even car wash.
Wait, car wash? Yes, you read it right. The possibilities for catering services are endless. As long as what you cater is food or drinks, and your prospective service is excellent, you can innovate unique ideas.
Commonly affiliated with catering service is the work contracts that they offer to their employees. When you have a catering service business, you need to hire several employees depending on how large the number of people will be attending an event. Since it is not every day that events are booked and scheduled, some catering services offer contractual work contracts for some employees. There are three types of work contracts that businesses, like catering services, utilize depending on how they need more or less workforce.
These are usually indefinite contracts that can last for as long as the employee wants to work for the company or business or ends in some form of termination. This type of employee is entitled to all forms of benefits provided by the specific organization for which he works.
These are also called fixed-term contracts. These types of contracts usually last for 3 months. However, it can either be extended or ended depending on various reasons. This type of employee, just like in permanent employment, is entitled to some forms of benefits provided by a specific organization depending on the time frame of the length of the contract. These are oftentimes used when the peak season arrives, and the volume of customers or clients exceeds normal, and the workforce is not enough or overworked.
This is not an employment contract but more of a work contract. The duration of term, salary, and conditions can vary depending on the contract that the business has to offer.
Independent contractors are oftentimes utilized by employers who need more workforce than usual. This usually happens when there are booked appointments on certain days wherein the expected volume of incoming customers is too large for permanent employees.
Will work contracts and catering services be treated as a supply of goods or a supply of services? Work contracts and catering services are both considered a supply of goods and a supply of services. In catering services, food, which is regarded as goods, is served to people; thus, catering is also categorized as service.
It doesn’t really matter whether it is a supply of goods or a supply of services. Let’s take a deeper look.
There are two classifications of supply; composite supply and mixed supply. In composite supply, the supply consists of two or more products in conjunction with each other. The products cannot be sold individually. The supply of goods, packing materials, transport, and insurance is a composite supply. Insurance, transport cannot be done separately if there are no goods to supply. The applicable tax for the product will be based on the main product, more known as principal supply, being sold. In this example, it is the supply of goods.
On the other hand, there is a mixed supply. Of course, the first condition for mixed supply is that it should not be a composite supply. The supplies are not dependent on each other and are not necessarily to be sold together. In these cases, the one with the highest tax rate will be applicable for the entire supply. Examples of this are products in the markets that are sold as a package. It can be a combination of a wallet and a necktie or a wristwatch and a belt sold together as a package.
That’s what I meant when I mentioned that it doesn’t matter whether work contracts and catering services are treated as a supply of goods or a supply of services. Catering services are services that can include a supply of goods, and at the same time, it consists of a service wherein food is served to each customer. It is nonetheless a composite supply since the principal product is the supply of goods or foods. The service can’t be served without the goods or foods. Given that example, we can all agree that the applicable tax will be the principal supply, which is the goods.
The question of which tax rate should you follow if you happen to offer catering services is not dependent on whether it is treated as a supply of goods or a supply of services? It is more of a question of how much your state charges for certain goods since goods are the principal product with catering services. Different states differ in tax rates. Since 2020, tax rates can vary between 2.9% and 7.25%.
Whether it is a supply of goods, a supply of services, or even both, you should not be confused about which tax rate applies to the supply. Always remember, it depends on whether it is a composite supply or a mixed supply. Also, it is dependent on your location or state.
You might be planning on starting your own catering service business. The only limit will be your imagination. Innovation is endless.
Or, you might be looking for a unique event’s place that is inclusive of goods. Try and check out SudsnSoda. SudsNSoda is the best one-stop shop for a car wash and a soda in town. Unique, ain’t it? You will have a unique experience as you satisfy your car cleaning high and your sugar high all in one convenient location. Visit our soda shack at any time – even without a car wash – and use our free vacuums. They also cater to all events in Utah! Corporate, weddings, birthday parties, graduations, reunions, movie nights, block parties, and more! Check out their website here. Carwash and sugar, you just can’t get enough with SudsnSoda. Just don’t get confused if the tax applied is based on the carwash, the snacks, or the service. Just sit back, and enjoy SudsnSoda. 🙂