Were meals sold to students by the nonprofit K-12 school in PLR 94-6 exempt from South Carolina sales tax?

Plain-English summary

South Carolina Private Letter Ruling 94-6 found that a nonprofit K-12 school's cafeteria meals sold to its students qualified for the historical school-meal sales-tax exemption.

The school educated kindergarten through twelfth-grade students, sold the meals on school grounds, and operated the program without profit. Its markup covered food and staff salaries but not utilities or building expenses. Students could buy meals daily or bring lunch, and the school sometimes served prepared food purchased from local businesses.

The regulation quoted in the PLR limited the exemption to meals sold within school buildings, without profit, to school children. It also stated that schools had to remit tax on meals sold to people other than school children.

Common questions

Q: Did the program have to lose money? No. The facts described it as self-supporting but not profitable.

Q: Did occasional purchased prepared food defeat the exemption? No, not on the ruling's facts.

Q: Did the quoted rule exempt meals sold to nonstudents? No.

Q: Can another school rely on this PLR? No. It was limited to ABC's specific program.

Citations and references

• S.C. Code Ann. § 12-36-910 (historical sales tax)
• S.C. Code Ann. § 12-36-2120(10)(a) (historical school-meal exemption)
• S.C. Regulation 117-174.116 (historical school-meal rule quoted in the PLR)

Subject

Meals Sold to School Children

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/PLR94-6.pdf

Original ruling text

SC PRIVATE LETTER RULING #94-6 (TAX)

TO:

ABC

SUBJECT:

Meals Sold to School Children
(Sales Tax)

DATE:

June 2, 1994

REFERENCE:

S. C. Code Ann. Section 12-36-910 (Supp. 1993)
S. C. Code Ann. Section 12-36-2120(10)(a)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (Supp. 1993)
SC Revenue Procedure #94-1

SCOPE:

A Private Letter Ruling is an official advisory opinion issued by the
Department of Revenue to a specific person.

NOTE:

A Private Letter Ruling may only be relied upon by the person to whom it is
issued and only for the transaction or transactions to which it relates. A
Private Letter Ruling has no precedential value.

Question:
Are sales of meals to students at ABC, as described in the facts, exempt from sales tax under
Code Section 12-36-2120(10)?
Conclusion:
Sales of meals to students at ABC, as described in the facts, are exempt from sales tax under
Code Section 12-36-2120(10).
Facts:
ABC, is a nonprofit South Carolina corporation organized exclusively for educational purposes.
The school is exempt from federal income taxes under Internal Revenue Code Section 501(a).

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ABC is a day school that educates students from kindergarten through twelfth grade. The school
has a cafeteria on school grounds. Unprepared food products are purchased from a wholesaler to
serve to students. Students' mothers are employed and compensated by the school to prepare and
serve the food. On occasion, prepared food, such as pizza, is purchased from a local business and
brought to the school to serve to the students.
Students may either purchase the school meal on a daily basis or may bring their own lunch. The
meal program at ABC does not make a profit. It is designed to be self supporting in that a mark
up is computed and applied to food cost to cover the cost plus staff salaries, but does not include
the cost of utilities, building expenses, etc.
Discussion:
Code Section 12-36-910(A) imposes the sales tax and reads, in part:
A sales tax, equal to five percent of the gross proceeds of sales is imposed upon every
person engaged or continuing within this State in the business of selling tangible personal
property at retail.
A sales tax exemption, however, is provided in Code Section 12-36-2120(10)(a) for sales of
certain meals or food items. This exemption exempts from the sales tax the sales price of:
meals or foodstuffs used in furnishing meals to school children, if the sales or use are
within school buildings and are not for profit;
Further, Regulation 117-174.116 addresses meals sold to school children and reads, in part:
Meals sold within school buildings, not for profit, to school children are exempted from
the sales tax by [code section 12-36-2120(10)]. This exemption is construed to include
only sales of meals to pupils of kindergartens, grammar and high schools, either public or
private, where it can be shown that there is no profit therefrom and where the sales are
made within the school building. Schools operating school lunch programs are required
to obtain a retail license and remit the tax on all sales of meals to persons other than
school children.

Based on the facts presented, sales of meals to students at ABC are exempt from sales tax under
Code Section 12-36-2120(10).
For questions concerning meals furnished to educational institutions, contact John McCormack
at 803-737-4438 or Deana West at 803-737-4439 in the Department's Tax Policy and Special
Procedures Division.

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