Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales and Use Tax Annotations


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T

550.0000 TAXABLE SALES OF FOOD PRODUCTS—Regulation 1603

Annotation 550.0847

(e) CATERERS

550.0847 Minimum Donation for Serving of Meals. An organization's operation consists of the following transactions:

The organization prepares and delivers two meals per day to people with AIDS and AIDS-related complex. The service is free. At the time of client intake, a donation of up to $4.25 per day, which is substantially less than the cost of each meal and delivery, is asked to help offset the cost of food, but no one is turned away if they are unable to pay.

Under a contract with a hospice program, the organization provides meals for the patient at a hospice. It provides the cooks and raw food to the kitchen where all of the food is prepared and served on the premises of the hospice.

The organization has an agreement with a charity where the charity will pay $2.00 per client per day for AIDS/ARC patients in its project. This agreement simply offsets a small part of the cost for the meals.

The transfer of meals for a suggested minimum donation is regarded as a sale of the meal since such a transaction is considered to be a transfer of tangible personal property for a consideration. The donations received from such sales are included in the retailer's gross receipts and the donations are subject to tax. The gross receipt from the sale of meals also includes the amounts received for the furnishing of raw food used to prepare the meals to be sold. Accordingly, the reimbursed costs for the services of the cooks and the food as described above are included in taxable gross receipts. The $2.00 per meal received for the transfer of meals to the charity is also a sale and the gross receipts from such sales are subject to tax. 6/9/88.