If I sell food, soft drinks, or candy to a jail or prison in Texas, or to inmates there, do I have to charge sales tax?

Plain-English summary

A food distributor with Texas locations wrote to the Comptroller's Tax Administration Division asking about House Bill 462, which taxes food, soft drinks, and candy sold to inmates confined in a correctional facility operated under the authority or jurisdiction of, or under contract with, the state or a political subdivision of the state. Specifically, the distributor asked: if it sells food items — including soft drinks and candy — to a correctional institution, must it charge Texas sales tax if it does not obtain a resale certificate?

The Comptroller explained that the existing exemption in Tax Code Sec. 151.314(d)(3) — covering food products, meals, soft drinks, and candy for human consumption served to a patient or inmate of a hospital or other institution licensed by the state for the care of humans — was not repealed. Instead, HB 462 added a new subsection (g) to Sec. 151.314 so that food products, meals, soft drinks, and candy sold to inmates are taxed. Meals, soft drinks, and candy that correctional facilities provide to inmates without charging the inmates remain untaxed. Prison employees and prison visitors (like everyone else in Texas) already had to pay tax on soft drinks, candy, and food ready for immediate consumption; effective October 1, 1995, inmates who purchase meals, soft drinks, and candy will also have to pay tax on those purchases.

Applying this to the distributor's situation: if meals, soft drinks, and candy are sold to a correctional facility in Texas, that sale is exempt, and a purchase voucher is sufficient proof of the government entity's exempt status (per Rule 3.322(f)). If the facility is operated by a private provider under contract with the state or a political subdivision, that provider must furnish an exemption certificate instead. However, if the distributor sells meals, soft drinks, and candy directly to inmates in a correctional facility, it must collect and remit sales tax on those sales beginning October 1, 1995.

The Comptroller noted this opinion is based on the facts submitted, and other facts — even similar ones — could produce a different result.

What this means for you

Food distributors and vendors selling to correctional facilities

Sales of food products, meals, soft drinks, and candy to the correctional facility itself remain tax-exempt. You do not need a resale certificate for these exempt sales — a purchase voucher documents the government entity's exempt status. If the facility is run by a private company under contract with the state or a political subdivision, get an exemption certificate from that contractor instead.

Vendors selling directly to inmates (e.g., commissary or vending sales)

If your customer is the inmate — not the facility — and the inmate is paying out of pocket for meals, soft drinks, or candy, you must collect and remit Texas sales tax on those sales starting October 1, 1995. This mirrors the tax that already applied to sales to prison employees and visitors.

Correctional facility operators

Food, meals, soft drinks, and candy you provide to inmates at no charge to the inmates continue to be exempt from tax under Sec. 151.314(d)(3) — that underlying exemption was not repealed by HB 462.

Accountants and tax professionals

The relevant distinction for tax purposes is who pays — a sale to the facility (exempt, per Sec. 151.314(d)(3) and Rule 3.322(f)) versus a sale to the inmate (taxable as of 10/1/95, per the new Sec. 151.314(g)). Watch for private operators under contract with government entities, who must furnish an exemption certificate rather than relying on a purchase voucher.

Common questions

Q: Does HB 462 repeal the existing tax exemption for food served to inmates?
A: No. The exemption in Tax Code Sec. 151.314(d)(3) for food products, meals, soft drinks, and candy served to a patient or inmate of a licensed institution was not repealed. HB 462 added a new subsection (g) taxing food, soft drinks, and candy sold to inmates.

Q: If a correctional facility gives an inmate a meal at no charge, is that taxed?
A: No. Meals, soft drinks, and candy provided by correctional facilities to inmates without charging the inmates remain untaxed.

Q: When does tax start applying to purchases made by inmates?
A: Effective October 1, 1995, inmates who purchase meals, soft drinks, and candy must pay tax on those purchases.

Q: I'm a food distributor selling to a correctional facility — do I need a resale certificate to avoid charging tax?
A: No resale certificate is needed for the exempt sale to the facility itself; a purchase voucher is sufficient proof of the government entity's exempt status under Rule 3.322(f). If the facility is operated by a private provider under contract with the state or a political subdivision, that provider must give you an exemption certificate.

Q: Do I have to collect tax if I sell soft drinks and candy directly to inmates rather than to the facility?
A: Yes. Beginning October 1, 1995, you must collect and remit tax on meals, soft drinks, and candy sold directly to inmates in a correctional facility.

Citations and references

Statutes:

• Tex. Tax Code Sec. 151.314(d)(3) — exemption for food products, meals, soft drinks, and candy served to a patient or inmate of a hospital or other licensed institution (not repealed)
• Tex. Tax Code Sec. 151.314(g) — added by HB 462, taxes food products, meals, soft drinks, and candy sold to inmates, effective 10/1/95

Rules:

• 34 Tex. Admin. Code Rule 3.322(f) — purchase voucher as proof of a government entity's exempt status

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9506L1352A10

Original ruling text

June 8, 1995

Dear **:

Thank you for your June 6, 1995, letter concerning HB 462 that taxes food,
soft drinks, and candy sold to inmates confined in a correctional facility
operated under the authority or jurisdiction of or under contract with this
state or a political subdivision of the state.

You are a food distributor with locations in Texas. You asked if you sell
food items, including soft drinks and candy, to a correctional institute,
are you to charge Texas sales tax if you do not obtain a resale certificate?

The exemption in Texas Tax Code Sec. 151.314(d)(3) for food products, meals,
soft drinks, and candy for human consumption served to a patient or inmate
of a hospital or other institution licensed by the state for the care of humans
was not repealed. Instead, subsection (g) was added to Sec. 151.314 so that food
products, meals, soft drinks, and candy sold to inmates is taxed. The meals,
soft drinks, and candy provided by correctional facilities to inmates without a
charge to the inmates are not taxed. Prison employees and visitors to prisons
(as well as the rest of the residents of Texas) have had to pay tax when
purchasing soft drinks, candy, and food ready for immediate consumption.
Effective, October 1, 1995, inmates will also pay tax when purchasing meals,
soft drinks, and candy.

Therefore, if meals, soft drinks, and candy are sold to a correctional facility
in Texas there is an exemption and a purchase voucher is sufficient proof of
the government entity's exempt status as explained in enclosed Rule 3.322(f).
An exemption certificate would be required from a correctional facility provider
with a contract with the state or political subdivision of the state. However,
if you sell meals, soft drinks, and candy to inmates in a correctional facility,
you must collect and remit tax on these sales beginning October 1, 1995.

This opinion is based on the facts you submitted. Other facts, though similar,
may yield different results.

You may call me toll free at 1-800-531-5441, ext. 5-0030. The direct line is
512/475-0030. You may also write to Tax Administration, Comptroller of
Public Accounts.

Sincerely,

David Somerville
Tax Administration Division

NOTE: Previous Accession Number 9506192L