Tax Type
Retail Sales and Use Tax
Description
Sale of meals to nursing home
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
06-25-1986
June 25, 1986
Re: §58.1-1821 Application and
§58.1-1824 Protective Claim/Sales and Use Tax
Dear *********************
This will reply to your letters of May 15, 1986, in which you request reconsideration of my determinations of November 21, 1983 and December 9, 1985, and your letter of May 29, 1986, in which you submit a protective claim for refund of sales and use tax assessed to your client.
Specifically, you contest my earlier determinations that the total compensation received by ************** (Taxpayer) from the sale of meals and related services to institutional customers was subject to the sales and use tax. The customers in question are nursing homes operated for profit or similar homes that do not enjoy exemptions from the tax on their purchases. The homes contracted with the taxpayer to furnish meals to their residents and compensated the taxpayer for the meals. The homes provided the meals to their residents as part of the overall fee paid by the residents for staying in the homes.
You base your request for reconsideration on the premise that the sale of meals from the taxpayer to the homes were exempt sales for resale as the homes in turn "sold" the meals to their residents. In support of your position, you cite the-opinion of the Missouri Supreme Court in Canteen Corporation v. Goldberg, 592 S.W.2d 754 (1980); however, a virtually identical situation has already been addressed by the Virginia Supreme Court in Commonwealth v. United Airlines, 219 Va. 374, 248 S.E.2d 124 (1978). The Virginia case focused upon the provision of meals to airline passengers as part of the charge for their airfare. The court found that the provision of such meals by airlines did not constitute a resale so as to exempt the purchase of the meals by the airline from the sales and use tax.
In addition, you state that the circumstances of this case are little different from those of another recent case in which the department deemed the-sale of meals to institutional customers to be exempt sales for resale. The two cases are readily distinguishable, however. The instant case involves the sale of meals to institutions, which provide the meals to their residents at no specific charge. The recent determination that you cite dealt primarily with the sale of. meals to a hospital conducted for profit which in turn resold the meals to employees, guests, and others for a specific consideration. The situation at issue in the instant case is analogous to another situation addressed in the recent determination that you cite, the provision of meals by the hospital to its patients. The determination that you cite clearly sets forth the taxability of such meals as the ultimate user or consumer of. the meals was the hospital. While the hospital obviously did not eat the meals, it did agree to furnish meals to its patients as part of the service that it provides. By purchasing meals from the food service, the hospital merely satisfied this obligation.
Based upon the foregoing, I do not find the transactions in question to represent exempt sales for resale.; therefore, I find no basis for relief of the tax assessed to the taxpayer. For the same reason and for the reasons given in my prior determinations, I also find no basis for holding your protective claim for refund. As to the question posed in your letters with respect to the taxpayer's contract with the it is my understanding that all gales to that institution after July 1, 1980 have been removed from the department's audit due to the enactment of a statutory sales and use tax exemption for purchases by nonprofit homes for adults. However, I have directed the department's Technical Services Section to analyze the audit to verify that such revisions were made and to notify you of the findings.
Inasmuch as your protective claim for refund has been denied, your client will have one year from this date in which to seek further remedy under Virginia Code Section 58.1-1825.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner