Were the $6 daily food deductions from nursery employees taxable sales of meals after July 1, 1989?

Plain-English summary

A nursery deducted $6 per day from each employee for food. It bought food in bulk, stored it, and had an employee cook prepare it for 75 to 100 other employees.

DRS concluded that preparation converted the bulk food into ready-to-eat meals. Sales of meals under $2 had been exempt from July 1, 1986 through June 30, 1989, so the employer had no liability for that period. Amounts received from employees on or after July 1, 1989 were taxable.

What this means for you

The historical ruling classified food by its prepared, ready-for-immediate-consumption form rather than how the employer first purchased it.

Common questions

How much did the employer deduct? $6 per employee per day.

Why was the food treated as meals? A cook prepared bulk food into portions ready for immediate consumption.

When did the ruling say the charges became taxable? For amounts received on or after July 1, 1989.

Citations and references

• Conn. Gen. Stat. § 12-412(51), as cited in the ruling.

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 89-130

Original ruling text

Ruling 89-130, Meals

This will reply to your letter of July 3, 1989, asking for advice on the sales and use tax ramifications on the food items that you provide to your employees pursuant to a contract. This response also refers to additional information provided by telephone and facsimile transmission dated June 30, 1989.

As we understand the facts, Company X is a nursery which hires laborers pursuant to a Labor Contract. Pursuant to this Contract, you, as the employer, make a deduction of $6.00 per day for food for each employee. Since a separate deduction is made for food provided by you from your employees' pay, it must be determined if the food you provide and charge your employees is in the form of bulk sales of "food products" not meant for consumption on or near your business location or in the form of "meals."

In analyzing the facts presented by letter, telephone and facsimile, it is clear that initially you purchase the food in bulk form, and it is delivered to your business location in bulk form. Then this bulk food is put in freezers and in other storage areas until a cook, an employee, prepares it for consumption by the other 75 to 100 employees. Once this cook finishes his preparation, these "food products" have been converted to such a form and in such portions that they are ready for immediate consumption, and these "food products" have, in essence, become "meals."

This finding is supported by the contractual designation in Block 13 entitled Board Arrangement of the Employment and Training Administration Form [ETA 790] and Items 9c and 10 of Attachment I thereon. Item 10 even uses the word "meals" and "bagged lunches" which indicate that they are ready for immediate consumption.

Since July 1, 1986, the sales of meals under $2.00 were exempted from sales tax; therefore, you incurred no tax liability for sales of meals from July 1, 1986 to June 30, 1989. See section 12-412(51) of the Connecticut General Statutes.

Based upon the foregoing, the amounts received from the employees on or after July 1, 1989 for these "meals" are subject to sales tax.

LEGAL DIVISION

October 4, 1989