What meal-sale receipts did California assign when an employer paid less than the minimum cash wage because employees received meals instead?

Plain-English summary

After a 1963 amendment removed the employer-meal exemption, tax counsel addressed employees who received meals instead of part of the cash required by minimum-wage orders.

The memorandum treated the difference between cash actually paid and the minimum wage as consideration for the meals. Section 6012 defined gross receipts as the sale price valued in money whether received in money or otherwise, so the legally recognized meal value became taxable gross receipts.

The source treated the wage difference as tax included and used the then-applicable 4/104 calculation. It reported that the issue had received thorough recent consideration and that representatives of the Attorney General's office concurred.

This conclusion differs from the earlier November 7, 1963 letter compiled in Annotation 550.1420, which had said no tax applied to the minimum-wage difference. The March 1964 memorandum records the later position.

Common questions

Was cash payment required for taxable meal receipts?

No. The memorandum relied on section 6012's inclusion of value received in money or otherwise.

Was tax added on top of the wage difference?

No. The historical method treated tax as included in that amount.

Citations and references

• California Revenue and Taxation Code section 6363 (as cited after amendment)
• California Revenue and Taxation Code section 6012 (as cited)
• Sales and use tax Ruling 53(g) and December 11, 1963 interpretation (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/550-1300.pdf

Original ruling text

State of California

Board of Equalization

550.1300

Memorandum
To:

Mr. REDACTED TEXT
Department of Industrial Relations

From:

E. H. Stetson, Tax Counsel

Subject:

Employee Meals and Minimum Wage Law

Date:

March 4, 1964

Effective September 20, 1963, Section 6363 of the California Sales and Use Tax Law was amended to eliminate the exemption from the sales tax of sales of meals by employers or employee organizations to employees. Sales of such meals are, accordingly, taxable as explained in sales and use tax Ruling 53 (g), and Interpretation of Ruling 53, Meals, As Applied to Employees' Meals, dated December 11, 1963. A problem has arisen concerning the application of tax when employees subject to minimum wage orders receive meals in lieu of cash payments. The difference between the amounts actually paid to employees subject to minimum wage orders and the amount of the minimum wage is regarded as consideration attributable to the furnishing of meals, and this difference represents, in our opinion, taxable gross receipts from the sale of meals. Under the provisions of Section 6012 of the Sales and Use Tax Law, the term "gross receipts" means the sale price "valued in money whether received in money or otherwise." The gross receipts from the sale of the meals is the value which is recognized by law for the purpose of compliance with minimum wage orders. This problem has recently been given thorough consideration and has been discussed with the Office of the Attorney General, whose representatives concur in the foregoing statement of the applicability of the tax. The difference between the amounts actually paid and the amount of the minimum wage will be considered to be sales tax included so that the tax due with respect to the meals may be measured by taking 4/104ths of this amount. Under this procedure, no amount as tax reimbursement need be charged to the employees because it is considered to be included in the value of the services rendered entitling the employees to compensation in the form of meals. It is respectfully suggested that this information be disseminated by you to your various offices throughout the state in the interest of uniformity and correct application of the sales tax. We make this suggestion because we have received information from our Fresno office indicating that REDACTED TEXT of your Fresno office, and perhaps other offices of the Department, have been under the impression that sales tax does not apply in the situation to which this memo is directed. Our position as set forth herein has been explained to our staff and will be furnished to the various tax service publications. We have also indicated our position to the general manager and to the counsel for the California State Restaurant Association. FHS:fb [1b]