Could schools buy soft drinks for resale as part of exempt student or teacher meals, and how were separate snack-bar or carnival sales treated?

Plain-English summary

Under Ruling 53(F), qualifying meals or food products sold by listed schools and school organizations to students or teachers were exempt. Those organizations did not need seller's permits merely to serve the exempt meals.

A school or named organization could buy soft drinks tax-free for resale when it served them with those meals. Without a seller's permit number, it could place the notation authorized by Ruling 68 on the resale certificate.

Separate sales were different. Soft drinks sold through school stores or snack bars were taxable and required the school to hold a seller's permit. Parent-teacher associations and similar organizations also needed permits for soft-drink sales at special events such as carnivals.

The supplier generally had to treat sales as taxable retail sales when the purchaser was not in the soft-drink-selling business and held no related seller's permit.

Common questions

Did the exempt-meal treatment cover a separate snack-bar drink?

No. The letter treated school-store and snack-bar sales as taxable.

Could a school without a seller's permit buy drinks for exempt meals for resale?

Yes, using the special notation described in Ruling 68 instead of a permit number.

What about drinks sold at a school carnival?

The school organization needed a seller's permit, and the supplier's resale certificate was to show that number.

Citations and references

• Sales and use tax Ruling 53(F) (enclosed and cited)
• Sales and use tax Ruling 68 (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/550-1680.pdf

Original ruling text

550.1680

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
April 24, 1950
Attention:
Gentlemen:
This is in answer to your letter of April 18 with respect to the application of the State sales tax to certain sales of soft drinks. As indicated by Paragraph F of Sales and Use Tax Ruling 53, copy enclosed, the tax does not apply to the sale of meals or food products for human consumption by public or private schools, school districts, student organizations, and parent-teacher associations to the students or teachers of a school. Accordingly, the school or any of the other named organizations are not required to hold a seller’s permit in connection with the serving of meals to students or teachers of the school. The school, or other organization, may, however, purchase soft drinks which are served with the meals on a tax-free basis for resale by making an appropriate notation on its resale certificate in lieu of a seller’s permit number, indicated by the third paragraph of Ruling 68, copy enclosed. The sale of soft drinks by public or private schools through school stores or snack bars is subject to the tax, and the school is required to hold a seller’s permit in connection with such sales. Accordingly, your sales of soft drinks to the school for resale other than as a part of a meal served pursuant to Paragraph F of Ruling 53, should be supported by a resale certificate indicating the purchaser’s seller’s permit number. School organizations, such as the parent-teacher associations, are required to hold a seller’s permit if they sell soft drinks at special events, such as school carnivals. Therefore, if you sell soft drinks to such organizations for resale, your claim of exemption should be supported by resale certificates, indicating the purchaser’s seller’s permit number. In general, your sales of soft drinks to any person or organization not engaged in the business of selling soft drinks, and who do not hold a seller’s permit in connection therewith, should be regarded as retail sales subject to the tax. Very truly yours, R. G. Hamlin Associate Tax Counsel RHG:HB