Were a church cafeteria's vegetarian lunches sold to congregation members taxable?

Plain-English summary

A church planned to sell vegetarian lunches from a volunteer-staffed cafeteria on its premises. Because the food was served as meals and for consumption at tables or similar facilities, the ordinary food-product exemption did not apply.

The sales nevertheless qualified for the separate religious-organization exemption on the opinion's assumptions. Counsel assumed the church met the cited constitutional property-tax standard, served the lunches at gatherings conducted for its congregation, sold them to raise revenue for church functions, and used the receipts for those functions. Under those facts, the lunches sold to congregation members for consumption on the premises were not taxable.

The result did not extend to opening the cafeteria to the public on a regular basis. Those public-period sales would be taxable even if the proceeds paid for church operations and maintenance.

Common questions

Did the general food exemption cover the cafeteria lunches?

No. The meals and on-premises service fell within exceptions to that general exemption.

Why were the congregation-member sales still exempt?

The separate religious-organization rule covered qualifying meals sold at organization-sponsored gatherings to raise revenue actually used for the organization's functions.

Could the cafeteria sell tax-free meals to the public regularly?

No. The letter expressly says regular public sales would not qualify under the cited religious-organization exemption.

Citations and references

• California Revenue and Taxation Code sections 6007, 6051, 6359, and 6363.5 (as cited)
• California Constitution article XIII, section 3(f) (as cited)
• California Sales and Use Tax Regulations 1602 and 1603(l) (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/550-1041.pdf

Original ruling text

550.1041

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

LEGAL DIVISION - MIC: 82
450 N STREET, SACRAMENTO, CALIFORNIA
(P. O. BOX 942879, SACRAMENTO, CA 94279-0082)
TELEPHONE: (916) 327-2291
FAX: (916) 323-3387

DEAN F. ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego
BRAD SHERMAN
Fourth District, Los Angeles
KATHLEEN CONNELL
Controller, Sacramento

November 9, 1995
BURTON W. OLIVER
Executive Director

Board of Directors
B--- B--- Culture Center
XXXX --- Lane
--- ---, CA XXXXX
Re: Sales of Meals by Religious Organizations
Dear Board Members:
This is in response to your letter dated September 7, 1995, in which you inquire about the application of sales tax to vegetarian lunches that your church plans to sell to members of your congregation. On October 22, 1995, your church plans to open and operate a cafeteria which will serve vegetarian lunches “to provide healthy food for members, senior citizens and people who seek
[a] better health condition.” We assume that this cafeteria is located on the church’s premises. According to your letter, the purpose of providing cafeteria services is to promote the congregation’s “spiritual needs;” to “work in unity with fellow members;” and to provide a place for “social gatherings, meetings for our members and fundraising.” You explain that the cafeteria will be staffed by volunteers and that all receipts from the sales of the lunches will be used for the operation and maintenance of the church’s facilities. It is your stated intent that the cafeteria’s use will be restricted to members of the congregation; however, you have also indicated that the cafeteria could be “used for senior citizen events or other community social services.” Your specific inquiry is whether the sales of vegetarian lunches that will be served at the cafeteria are subject to sales tax. Retail sales of tangible personal property in California are subject to sales tax, which is measured by gross receipts, unless specifically exempt by statute. (Rev. & Tax. Code § 6051.) A retail sale is a sale for any purpose other than resale in the regular course of business. (Rev. & Tax. Code § 6007.) Revenue and Taxation Code section 6359 provides the general exemption for certain sales of food products. This exemption is explained in Regulations 1602 and 1603, copies of which are enclosed.

Board of Directors

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November 9, 1995
550.1041

Section 6359(a) states the general rule that sales of food products for human consumption are exempt from tax. However, subdivision (d) of section 6359 contains a list of circumstances in which the sales of food products are not exempt from tax. The circumstances relevant to your inquiry are: "(1)

When the food products are served as meals on or off the premises of the retailer.

"(2)

When the food products are furnished, prepared, or served for consumption at tables, chairs, or counters or from trays, glasses, dishes, or other tableware whether provided by the retailer or by a person with whom the retailer contracts to furnish, prepare, or serve food products to others."

Thus, based on your description, your sales of food products for human consumption do not qualify for the exemption provided by section 6359. However, your church’s sales might be exempt from tax under section 6363.5. Subdivision (l) of Regulation 1603 explains this exemption: "Tax does not apply to sales of meals and food products for human consumption furnished or served by any religious organization at a social or other gathering conducted by it or under its auspices, if the purpose in furnishing or serving the meals and food products is to obtain revenue for the functions and activities of the organization and the revenue obtained from furnishing or serving the meals and food products is actually used in carrying on such functions and activities. For the purposes of this regulation, 'religious organization' means any organization the property of which is exempt from taxation pursuant to Subdivision (f) of Section 3 of Article XIII of the State Constitution." We assume that the vegetarian lunches that you intend you sell to members of the congregation are served in conjunction with gatherings and events conducted by the church on behalf of the congregation and that the purpose of these sales is to obtain revenue for carrying on the functions of the church. We also assume that the church qualifies as an organization, the property of which is exempt pursuant to Subdivision (f) of Section 3 of Article XIII of California's State Constitution. Based on these assumptions and the facts of your letter, we conclude that the church's sales of vegetarian lunches to members of the congregation for consumption on its premises will not be taxable. You have indicated that the cafeteria could be “used for senior citizen events or other community social services.” If you intend to open the cafeteria to the public on a regular basis, sales by the cafeteria during these periods will not be eligible for the exemption provided by section 6363.5, regardless of the fact that the receipts will be used for the church’s operation and maintenance. (Business Taxes Law Guide Annotation 550.1040 (2/28/63).)

Board of Directors

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November 9, 1995
550.1041

If you have any further questions, please feel free to contact this office again. Sincerely,

Patricia Hart Jorgensen
Senior Staff Counsel
PHJ:cl
Enclosures (Regs. 1602 & 1603)
cc:

Sacramento District Administrator