Could a hospital buy disposable patient menus tax-free as nonreusable components of the meals it served?

Plain-English summary

The redacted hospital chief accountant's absent December 17, 1974 letter to Oakland official Verne Ferriera argued that dietary-department menus were tax-free nonreusable meal components because staff placed them on patient trays and discarded them after pickup.

The hospital could not buy the menus without tax on that basis.

Although menus were placed on trays and discarded after use, their function was to communicate the next day's planned meals and let patients tell dietary staff their selections. They did not become components of the meals or food products.

The hospital was therefore the consumer of the menus.

The live annotation uses “residents or patients,” while the supporting letter's quoted regulation uses “patients or inmates.” The PDF supplies no regulation history, menu, invoice, dietary procedure, selection, disposal, audit, appeal, or later outcome.

Common questions

Did single-use disposal make the menu exempt?

No. The item's function and relationship to the meal controlled the letter's analysis.

Was the menu transferred as part of the meal?

No. It was a communication tool for the patient's next-day choices.

Who consumed the menus for tax purposes?

The hospital.

Citations and references

• California Sales and Use Tax Regulation 1503 — quoted in part for nonreusable items that become components of meals or food products furnished or served to patients or inmates; complete text, subdivision, version, examples, and later history not supplied
• December 17, 1974 redacted hospital chief-accountant letter to Oakland official Verne Ferriera, asserting that menus placed on patient trays and discarded after tray pickup qualified as nonreusable meal components — request, menus, purchase invoices, dietary procedures, patient trays, selection records, disposal records, and tax records not reproduced in the official PDF
• January 29, 1975 Tax Counsel Gary J. Jugum response treating the hospital as consumer because the menus communicated the next day's planned meals and recorded patient choices rather than becoming meal components — no hospital reply, changed procedure, purchase transaction, return, audit, assessment, refund claim, appeal, or later outcome supplied; blind copies sent to Audit Review and Refunds and a redacted auditing office
• Official Annotation 300.0070's hospital dietary department, nonreusable item, meal-component quotation, residents or patients, and January 29, 1975 rules — the live annotation says “residents or patients” while the supporting letter's quoted regulation says “patients or inmates”; it omits the December 17 request and Oakland-referral provenance, patient-tray and disposal facts, next-day communication and selection function, absent menus and transaction records, copied offices, later outcome, and reliance status and supplies no record resolving the wording difference

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/300-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/300-0070.pdf

Original ruling text

300.0070

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)

January 29, 1975

Mr. R--- S--Chief Accountant
B--- Hospital
XXXX --- Road
--- ---, California XXXXX

Dear Mr. S---:
Re:

SR --- XX XXXXXX

Your letter of December 17, 1974, addressed to Mr. Verne Ferriera of our Oakland office has been referred to this office for consideration in accordance with your request. You have raised a question as to the proper application of the tax to menus purchased for use in your dietary department. You are of the opinion that the menus may be purchased without payment of tax on the grounds that the menus are placed on patient trays when the meal is served and are disposed of when the tray is picked up, when the patient is finished with his or her meal. You state that it is your understanding that such use qualifies menus for exemption under Regulation 1503 of the State Board of Equalization as a non-reusable item which becomes a component part of a meal. We are of the opinion that the menus in question do not “become components of meals or food products…furnished or served to patients or inmates” within the meaning of that language as it is used in Regulation 1503. The menu is used by the hospital to communicate to the patient the next day’s planned meals. The patient selects the items which he or she desires for the following day’s meals. We are of the opinion that the institution itself is the consumer of the menus which are the means by which the patient indicates his or her choice of meals to the dietary staff for the following day.

Mr. R--- S--SR --- XX XXXXXX

-2-

Very truly yours,

Gary J. Jugum
Tax Counsel

j:alicetilton

bc:

Audit Review and Refunds (CHF)
--- – Auditing

January 29, 1975
300.0070