For the cited five-or-more-employee rule, did a school district count employees districtwide or separately at each school?

Plain-English summary

Tax counsel treated a school district—not each separate school—as the employer for the cited rule referring to five or more employees. The threshold therefore counted all employees of one district together.

The letter also separated exempt and nonexempt cafeteria customers under the then-current section 6363. Students, teachers, and employees with supervisory teaching duties, such as principals and department chairs, were within the stated exemption. Clerical, business-office, security, buildings-and-grounds, trustee, and other lay customers were not.

For nonexempt employees, the letter said tax applied only to the extent described in Ruling 53(g). A bookkeeping entry merely assigning a value to meals furnished as compensation was not treated as a specific charge.

Common questions

Was the five-employee threshold tested school by school?

No. The source treated the district as the employer and counted its employees districtwide.

Did the letter include principals and similar administrators with teachers?

Yes, when they had supervisory teaching duties. It also included visiting students and teachers.

Did every meal furnished to other school employees create taxable receipts?

No. The source referred to Ruling 53(g) and said a compensation bookkeeping entry alone was not a specific charge.

Citations and references

• California Revenue and Taxation Code section 6363 (as cited after revision)
• Sales and use tax Ruling 53(g) (enclosed and 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/550-1320.pdf

Original ruling text

550.1320

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
November 15, 1963
Attention: REDACTED TEXT
Gentlemen:
This is in reply to your letter of November 5, 1963, to our Fresno district office, requesting clarification of the recent revision to section 6363 of the Revenue and Taxation Code as it relates to sales taxes on sales of meals served to employees in School District-operated cafeterias. Unless the employees are teachers or have supervisorial teaching duties, as for example principals, vice-principals, deans, chairmen of departments, etc., we do not believe that the sales of meals to these employees are within the exemption. Although they may be “associated” in the educational process, the law is specific that the exemption applies only to meals served to “students or teachers.” Even without the rule that exemptions from taxation are strictly construed, it would be difficult to regard the words “students or teachers” as including such persons as clerical employees, business office employees, security patrol personnel, or building and grounds personnel. Teachers or students visiting from other school are, however, included within the exempt group. Where dinners are served to mixed groups, the tax will not apply to sales to the students and teachers, including those with supervisorial teaching duties. Sales to members of boards of trustees, and other “lay” persons, are, however, taxable. Sales to employees not exempt as sales to students and teachers are, however, taxable only to the extent indicated in ruling 53(g), copy enclosed. In applying this ruling, book entries made merely for the purpose of placing monetary value on meals furnished employees as a part of compensation (to meet the requirements of various laws, union contracts, etc.) will not be considered specific charges. The references to “five or more employees” in ruling 53(g), as applied to a school district would, in our opinion, apply to all of the employees of any one district, rather than to each separate school operation. This is because the “employer” is the district, not the individual schools. Very truly yours, E. H. Stetson Tax Counsel EHS:fb Enclosure cc: Fresno – District Administrator