January 10, 2025
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the “Taxpayer”) requesting a ruling on the application of the retail sales and use tax on the sales of school lunches to individual parents and various schools.
FACTS
The Taxpayer is a food service provider that prepares, sells, and delivers hot foods to preschools, daycares, private schools, and public charter schools. The Taxpayer offers breakfast, lunch, snacks, and beverages as well as bulk wholesale supplies. The Taxpayer requested a ruling regarding the taxability of its hot foods sales and presented three scenarios for consideration, each of which will be addressed separately below.
This response is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.
RULING
Scenario 1
A parent orders lunches through an online portal for their student who attends a public-school receiving government subsidies. The only lunch options for students are to (1) purchase lunch through a third-party online portal or (2) pack a lunch from home. The school itself does not offer lunches for purchase. Are sales to parents subject to sales tax because the parent does not have a sales tax exemption while the school does?
Title 23 of the Virginia Administrative Code (VAC) 10-210-4020 A 1 provides that, generally, the retail sales and use tax does not apply to sales of tangible personal property to nonprofit schools, colleges, and other institutions of learning for their use or consumption and paid for out of their funds. [Emphasis Added]. Title 23 VAC 10-210-4020 A 2 states in pertinent part that “property or services must be purchased by the educational institution. Individuals are not eligible for the exemption even if they are reimbursed by the institution for their expenditures.” [Emphasis Added]. In this instance, the Taxpayer is a dealer, and food sales to the parents of students constitute a retail sale and are subject to sales tax.
Scenario 2
A daycare/early education facility operating for a profit has a mix of preschool, kindergarten, and elementary students. The school does not receive governmental funding. Is sales tax charged regardless of whether the parent or school purchases lunches for the students?
Title 23 VAC 10-210-4020 B provides that the sales of tangible personal property to schools, colleges, and other institutions of learning are taxable when the institution is conducted for profit. For-profit institutions are required to pay the tax to their vendors at the time of purchase unless their purchases are made for resale as dealers. All sales of tangible personal property made by such institutions are taxable. In addition, these institutions must collect the tax on any retail sales of meals to students or others if the price of the meals is not included in room, board, or tuition charges or fees.
In this scenario, the Taxpayer would need to charge sales tax on its sales to parents. Sales to the education facility would be taxable unless a valid Form ST-10, the exemption certificate for dealers purchasing tangible personal property for resale, is provided at the time of sale. See Virginia Code § 58.1-623.
Scenario 3
A religious school has lunches available for purchase from the school, or a third-party provider, or the student can bring a lunch from home. The parent purchases lunches through a third-party online portal. The school itself does not pay for the lunch nor does the school reimburse the parents for the lunches. Are such sales to these parents subject to sales tax?
Virginia Code § 58.1-609.11 provides sales and use tax exemptions for nonprofit organizations and entities. Title 23 of the Virginia Administrative Code (VAC) 10-210-310 H 2 provides in part that “kindergartens, primary schools, secondary schools, preschools, nurseries, day care centers, and similar activities held in the public church buildings that carry out the work and ministry of the church and that are not separate legal or business entities are generally exempt from the tax on the purchases of tangible personal property...” In Public Document 96-196 (8/14/1996), the Department ruled that sale of box lunches to a church-affiliated school that served the lunches to students qualified for the non-profit exemption.
Similar to the first scenario, the Taxpayer is selling food to the parents of students, and not directly to the school. As previously mentioned, food sales to parents are not tax exempt. As such, the Taxpayer should collect sales tax on its food sales to parents.
The Code of Virginia sections and regulations cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If there are any questions regarding this determination, please contact ***** in the Department’s Office of Tax Policy and Legislative Affairs, Tax Adjudication and Resolution Division, at *****, or via email *****.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR\4397.F