Does an off-campus pizzeria owe sales tax on food it delivers to college students under a campus meal-plan voucher system?

Plain-English summary

Barrow Food Corporation runs a pizzeria off campus near SUNY Stony Brook. It acts as a subcontractor to ARA (Araserve), which has a contract with the campus Faculty Student Association (FSA) to sell food to students. When ARA's on-campus facilities are closed, students phone Barrow, which prepares and delivers food onto campus; students pay with signed vouchers drawn on their FSA Declining Balance Accounts (no cash), and Barrow redeems the vouchers with ARA (less a commission), agreeing to be responsible for any sales tax. Barrow asked whether it must collect sales tax on these sales.

The Department said yes, Barrow must collect and remit sales tax. Tax Law § 1105(d)(i) taxes food and drink sold by restaurants and similar establishments. There is an exclusion in § 1105(d)(ii)(B) (and Reg. § 527.8(h)(3)) for food sold to an enrolled student under a no-cash contractual meal plan — but only when the sale is made at a restaurant, tavern, or other establishment located on the premises of the college. SUNY Stony Brook qualifies as an eligible postsecondary school, but Barrow is not located on campus, so its deliveries are not sales "at … an establishment on the premises" of the school. The on-campus student-meal exclusion therefore does not apply, and Barrow's food sales to the students are taxable under § 1105(d)(i) / Reg. § 527.8(a).

What this means for you

Off-campus restaurants serving campus meal plans

Being paid through a college's meal-plan/voucher system does not make your sales tax-free. The student-meal exclusion is location-specific: it requires the sale to be made at an eatery on the college's premises. If you operate off campus and deliver in — even under contract with the campus food-service provider — your sales to students are taxable, and you (as the seller responsible for the tax) must collect and remit it.

On-campus vs. off-campus is the dividing line

The same food, same students, and same voucher plan can be non-taxable when sold by an on-campus establishment and taxable when sold by an off-campus one. The exclusion follows the premises, not the payment mechanism or the identity of the meal-plan operator.

Accountants and tax professionals

The exclusion in § 1105(d)(ii)(B) / Reg. § 527.8(h)(3) has an express on-premises requirement. The Department assumed the ARA–FSA arrangement itself qualified, but denied the exclusion to Barrow solely because Barrow's establishment is off campus. Result: taxable under § 1105(d)(i) / Reg. § 527.8(a).

Common questions

Q: If I'm paid through the campus meal plan, is my food tax-free?
A: Not automatically. The student-meal exclusion requires the sale to be made at an establishment on the college's premises. An off-campus seller doesn't meet that condition, so its sales are taxable.

Q: Why does it matter that Barrow is off campus?
A: The § 1105(d)(ii)(B) exclusion is location-based — it applies only to food sold at a restaurant or other establishment on the school's premises. Barrow's off-campus location put its deliveries outside the exclusion.

Q: Who is responsible for the sales tax here?
A: Barrow. It agreed to be responsible for any sales tax on these transactions, and the Department held it liable for collecting and remitting the tax on the food delivered to students.

Q: Can another taxpayer rely on this opinion?
A: No. An advisory opinion binds the Department only as to the petitioner and the facts described; another taxpayer with different facts cannot rely on it.

Citations and references

Statutes and authorities:

• Tax Law § 1105(d)(i) (tax on sales of food and drink by restaurants, taverns, and other establishments)
• Tax Law § 1105(d)(ii)(B) (exclusion for on-campus food sold to enrolled students under a no-cash contractual arrangement)
• Sales and Use Tax Regulations § 527.8 (sale of food and drink; § 527.8(a) imposition; § 527.8(h)(3) postsecondary-student exclusion)
• Tax Law § 1116(a) (exempt organizations)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a92_68s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-92 (68) S
Sales Tax
September 29, 1992

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S920424A

On April 24, 1992 a Petition for Advisory Opinion was received from Barrow Food
Corporation, 1099 Rte-25A, Stony Brook, New York 11790.
The issue raised by Petitioner, Barrow Food Corporation, is whether it is obligated to collect
sales tax on food delivered to the campus when acting as a subcontractor to another company which
has a contract to sell food, food products and beverages at food service facilities located on the
campus of the State University of New York at Stony Brook.
Petitioner, Barrow Food Corporation, is a recently formed New York Corporation whose
purpose was to acquire a retail pizzeria doing business at 1099 Rte-25Ao Stony Brook, N.Y. 11790.
The previous owners had entered into a contract with Araserve, Inc. (hereinafter ARA), to provide
a pizza delivery food service to the campus. ARA has an agreement with the Faculty Student
Association of the State University of New York at Stony Brook (hereinafter FSA) to sell food, food
products and beverages, etc. to students from its facilities located on campus. ARA does not keep
its on-campus facilities open 24 hours a day, and consequently has entered into contacts with off­
campus food suppliers to provide delivery of food to students on campus when its facilities are
closed. For the purposes of this opinion it is presumed that the agreement between ARA and FSA
meets the terms and conditions and qualifies for the exemption provided by Section 1105(d)(ii)(B)
of the Tax Law.
In a typical transaction a student will call Petitioner with a food request. Petitioner will
prepare the food and deliver it on campus to the student. The student may utilize their FSA Declining
Balance Accounts to purchase such food by presenting Petitioner a signed voucher (no cash or
checks are involved) for the food. Petitioner will submit the voucher to ARA for redemption. ARA
will pay Petitioner the face value of the voucher minus ARA's commission. The agreement also
provides that Petitioner be responsible for any sales tax owed on the receipts from such transactions.
Before any sale is made to a student, Petitioner must verify (via a computer terminal to ARA) that
the student has not exceeded his credit limit.
Section 1105 of the Tax Law states, in part:
Imposition of sales tax. -- . . . there is hereby imposed and there shall be paid a tax
. . .upon:
(d)(i) The receipts from every sale of beer, wine or other alcoholic beverages or any
other drink of any nature, or from every sale of food and drink of any nature or of
food alone, when sold in or by restaurants, taverns or other establishments in this
state ....
(ii) The tax imposed by this subdivision shall not apply to:
TP-9 (9/88)

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TSB-A-92 (68) S
Sales Tax
September 29, 1992
(B). . .food or drink, other than beer, wine or other alcoholic beverages, sold
at a restaurant, tavern or other establishment located on the premises of a college,
university or a school (other than a nursery school, kindergarten, elementary or
secondary school) to a student enrolled therein who purchases such food or drink
under a contractual arrangement whereby the student does not pay cash at the time
he is served, provided the school, college or university described in this paragraph
is operated by an exempt organization described in subdivision (a) of section eleven
hundred sixteen, or is created, incorporated, registered, or licensed by the state
legislature or pursuant to the education law or the regulations of the commissioner
of education, or is incorporated by the regents of the university of the State of New
York or with their consent or the consent of the commissioner of education as
provided in section two hundred sixteen of the education law;. . .
Section 527.8 of the Sales and Use Tax Regulations states, in part:
527.8 Sale of food and drink [Tax Law, §1105(d)] (a) Imposition. Sales tax
is imposed on the receipts, including any cover, minimum, entertainment or other
charge, from every sale of beer, wine or other alcoholic beverages and food or drink
of any nature sold in or by restaurants, taverns or other establishments in this State
or by caterers:
(1) in all instances where the sale is for consumption on the
premises where sold;
(2) in those instances where the sale is for consumption off the
premises and the vendor (or someone acting on behalf of the vendor)
after delivery either serves or assists in serving, cooks, heats or
provides services with respect to the food or drink; and
(3) in those instances where the sale is for consumption off the
premises of the vendor all sandwiches and other food and drink
unless the food or drink is sold in:
(i) an unheated state; and
(ii) the same form and condition, quantities
and packaging commonly used by food stores not
principally engaged in selling foods prepared and
ready to be eaten.
...
(h) Exclusions. The tax imposed on the sale of food or drink shall not apply to:

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TSB-A-92 (68) S
Sales Tax
September 29, 1992
(3) Food or drink, other than alcoholic beverages, sold to an enrolled post
secondary school student, under the terms of a contractual agreement whereby the
student does not pay cash when served. In addition, such sales must be made at a
restaurant, tavern or other establishment on the premises of the school which is a
postsecondary school. Such postsecondary school must be operated by an exempt
organization or operated with the sanction of the State of New York.
In the instant case, the State University of New York at Stony Brook is considered to be a
qualifying postsecondary school for the purposes of Section 1105(d)(ii)(B) of the Tax Law and
Section 527.8(h)(3) of the Sales and Use Tax Regulations. However, when delivering food to
students located on the campus of SUNY at Stony Brook, Petitioner, who is not located on campus,
is not considered to be making a sale of food at a restaurant, tavern or other establishment on the
premises of SUNY at Stony Brook. Therefore, Petitioner's food sales do not qualify for the
exclusion from sales tax provided under Section 1105(d)(ii)(B) of theTax Law and Section 527.8(h)
of the Sales and Use Tax Regulations.
Rather, Petitioner's receipts from the sales of food to the students on the campus of SUNY
at Stony Brook are subject to the tax imposed under the provisions of Section 1105(d)(i) of the Tax
Law and Section 527.8(a) of the Sales and Use Tax Regulations. Accordingly, Petitioner is liable
for collecting and remitting sales tax on the receipts from sales of food delivered to students on the
campus of SUNY at Stony Brook.

DATE: September 29, 1992

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.