Were meals sold to state-prison inmates exempt as meals furnished to residents of an institution?

Plain-English summary

A seller asked the Board to reconsider its position that meals sold to state-prison inmates did not qualify for the institutional-meal exemption. The seller argued that a prison was plainly an institution and pointed to older regulatory language referring to inmates.

The Board maintained its position. Although a prison might be an institution in ordinary dictionary usage, the cited statute defined the facilities covered by the exemption, and that definition did not include prisons. The agency said it could not expand the statutory list; only the Legislature could do so. The older regulation's change from "inmates" to "residents" did not alter the defined categories.

Meals sold to prison inmates were therefore taxable. Snack foods sold separately for a separate price were exempt effective December 1, 1992, but snack foods included as components of an inmate meal remained part of the taxable meal.

Common questions

Why did the ordinary meaning of institution not control?

The source said the statute supplied a specific definition for the exemption, and the Board could not broaden it administratively.

Were separately sold snacks taxable too?

The letter said separately priced snack foods were exempt effective December 1, 1992.

What if snack foods were included in the inmate meal?

They remained taxable as components of the taxable meal.

Citations and references

• California Revenue and Taxation Code section 6363.6 (as cited)
• California Sales and Use Tax Regulations 1503 and 1603(m) (as cited)
• Former Tax Ruling No. 7 (as cited)

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/550-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/550-0190.pdf

Original ruling text

550.0190

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

WILLIAM M. BENNETT
First District, Kentfield

1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-3828

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles
GRAY DAVIS
Controller, Sacramento

January 14, 1993
BURTON W. OLIVER
Executive Director

Ms. M--- L--- C--President, W--- Sales
XXX --- Street
--- ---, California XXXXX
Re:

[No Seller's Permit]
Sales of Meals to Institutions

Dear Ms. C---:
I am answering your letter dated December 15, 1992, to me. You were following up on my letter to you of September 9, 1992, and our recent telephone conversation regarding sales of meals to institutions. You ask me to reconsider the opinion of the Legal Division, as expressed in that letter, that State prisons are not considered "institutions" for the purpose of the exemption from sales and use tax for sales of meals to "institutions" pursuant to Regulation 1603(m). In your letter as well as over the phone, you asked "if a prison is not an institution, what is it?" As we discussed over the phone and as I stated in my letter, while a prison may be an "institution" in the dictionary sense, it is not the kind of "institution" covered by the regulation. The term "institution" as used therein is defined in Revenue and Taxation Code Section 6363.6, the statute which the regulation interprets and implements. The Board, as an administrative agency, is forbidden to expand that definition. You indicate that you found an old copy of the regulation from 1974 indicating it has been re-written to exclude prison inmates. I have researched the regulation, even going back to former Tax Ruling No. 7, the predecessor of Regulation 1503. Although a reference to sales to "inmates" was contained in sub-division (b)(2) at that time (it was changed to "residents" in 1979), the definition of "institutions" contained therein includes the same sorts of facilities as today and does not include prisons.

Ms. M--- L--- C---

-2-

January 14, 1993
550.0190

You correctly note that sales of "snack foods" when sold separately for a separate price are exempt from tax effective December 1, 1992. However, no statute exempts your sales of meals to prison inmates. If the snack foods are included in the meals, they are also subject to tax as components of taxable meals. We are required to follow the statutory definition and may not extend the exemption to institutions other than those set out therein. Only the Legislature can do that. I hope the above discussion has answered your question. If you need anything further, please do not hesitate to write again. Sincerely,

John L. Waid
Tax Counsel

JLW:es