Were subsidized cafeteria meals sold mainly to low-income disabled employees exempt under California's charitable-sales provision?

Plain-English summary

The organization's employee-cafeteria sales were exempt under historical section 6375 and Ruling 40 because they principally assisted purchasers in distressed financial condition.

The cafeteria aimed to give disabled employees at least one nourishing, balanced meal each day at an affordable price. The organization subsidized the service by about 50%, producing a complete 50-cent lunch, while food purchases averaged 25 to 75 cents.

Well over half of the meals went to disabled people whose incomes were at or below the letter's then-used poverty figure of $225 per month. The organization had also already received the section 214 welfare property-tax exemption.

Common questions

What made the meal sales assistance rather than ordinary cafeteria sales?

The stated purpose, large subsidy, low price, and concentration of meals among financially distressed disabled employees.

Did every meal have to go to a qualifying employee?

The letter said well over 50% were served to the described employees and concluded the sales were made principally as assistance.

Is $225 per month a current poverty standard?

No. It is the historical figure stated in the 1970 source.

Citations and references

• California Revenue and Taxation Code section 6375 and historical Ruling 40 — cafeteria-sales exemption applied
• California Revenue and Taxation Code section 214 — existing welfare property-tax exemption noted

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/165-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/165-0090.pdf

Original ruling text

165.0090

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

July 29, 1970
Dear Mr. REDACTED TEXT:
Confirming our telephone conversation of Tuesday, July 28, in response to your letter of July 23, sales of meals and food products in the cafeteria which you operate for your employees are exempt from sales and use tax under Revenue and Taxation Code Section 6375 and Ruling 40. As outlined in your letter, the primary purpose in providing the cafeteria service is to be certain that your disabled employees have at least one nourishing and well-balanced meal a day at a price they can afford. To this end, your organization subsidizes the meal service about 50 percent. As a result, these employees receive a complete luncheon meal for $.50. Purchases of food average from $.25 to $.75. These sales are made principally as a matter of assistance to purchasers in a distressed financial condition. Well over 50 percent of the meals are served to disabled persons whose incomes are at or below the poverty level, that is, $225 per month. Your organization has previously applied for and received the “welfare exemption” from property tax under Section 214. Very truly yours, Lawrence A. Augusta Tax Counsel LAA:lt

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