Response
February 26, 1993
Request
December
2, 1992
XXXXX
Utah
State Tax Commission
160
East Third South
Salt
Lake City, UT 84134
Dear
XXXXX:
Pursuant
to our discussion of this afternoon, we respectfully request an advisory
opinion concerning an exemption from charging sales tax on food served in a
secondary school cafeteria by a third party under a contract with the school
district.
We
are planning to be a party to a joint venture serving fast food in the XXXXX
High School Cafeteria under a contract with the XXXXX. The joint venture will be responsible for
preparation and sale of the food. The
food will be prepared in the kitchen at the XXXXX and sold to students and
School District personnel. We will be
allowed to use all existing equipment at the school, however, we may find it
necessary to supplement that equipment.
Food
will be prepared and served by joint venture employees and students. Manning needs have not been determined at
this time, so we can not say with any degree of certainty how many students
will be involved.
There
is no intention to serve or sell food to the general public.
I
would like to thank you, and all of the other people I talked with this
afternoon. I certainly appreciate
everyone’s courtesy and helpfulness.
Sincerely,
XXXXX
The
Proposal can be located in the Tax Commission files.
XXXXX
Utah
State Tax Commission
160
East Third South
Salt
Lake City, UT 84134
Dear
XXXXX:
Thank
you for your consideration and help in trying to get a sales tax exemption for
the lunch program at the XXXXX.
Pursuant
to our discussion, enclosed is a copy of the proposal that the XXXXX of
Directors and School Administrators are considering. As we discussed, this proposal was made under the assumption that
no sales tax would be due on the sales to the students, and that service would
not be made to the public. If an
exemption is not granted, then the prices quoted in the proposal would have to
be adjusted.
As
you can see from the prices proposed, we have tried to keep the cost to the
students at an absolute minimum in order to accommodate the most people. I hope the Tax Commissioners realize that by
raising the prices by the amount of sales tax, (and XXXXX is higher than
anywhere in the state) there will be those who will not be able to avail
themselves of the lunch program.
Again,
thank you for your help.
Sincerely,
XXXXX
XXXXX
Re: Advisory Opinion - Sale of Food in a Secondary
School Cafeteria by a Third Party Under Contract to a School District
Dear
XXXXX:
Your
request (copy attached) for an advisory opinion as to whether your joint
venture would be required to collect sales tax on food served to students,
faculty and school district personnel, in the XXXXX cafeteria was referred to
the Auditing Division for their analysis.
It
is the division staff recommendation that:
1. The relevant statute is Utah Code Annotated
Section 59-12-104(13), which designates as exempt, “sales of meals served
by...public elementary and secondary school.” (Emphasis added.)
2. When a third party contracts with such
school to prepare and sell meals to students, the exemption does not apply
since the meals are no longer “served by the school” as the exemption
requires. The school’s exemption is not
transferable.
3. The contractor is not acting as an agent for
the school under the terms of the proposal offered by XXXXX. The contractor substantially retains
profits, and losses are borne by the contractor.
4. The food sales under the outlined
circumstances would be subject to the tax.
This treatment is consistent with the treatment of full service vending
machines placed in schools by third parties as outlined in Tax Bulletin 15-88
(copy attached.)
Based
upon the facts presented in your letter, we are in agreement with the Auditing
Division’s recommendations. Obviously,
if there are deviations from these facts, this opinion may be negated.
If
you do not agree with this determination, you may appeal to the Tax Commission
for a formal hearing. The results of
that hearing would constitute a declaratory judgment and be appealable to the
Utah State Supreme Court. A Notice of
Appeal Rights and a copy of the Utah Taxpayer Bill of Rights are attached.
To
arrange for Americans with Disabilities Act accommodations, please contact the
Tax Commission at (801) 530-6920, (801) 530-6077 or TDD (801) 530-6269 allowing
three working days notice.
For
the Commission,
Joe
B. Pacheco
Commissioner