I sell prepared school lunches to preschools, daycares, and private schools — do I need to charge sales tax, and does it matter whether the parent or the school pays?

Plain-English summary

A food service provider that prepares, sells, and delivers hot breakfasts, lunches, snacks, and beverages (plus bulk wholesale supplies) to preschools, daycares, private schools, and public charter schools asked the Department to rule on three specific scenarios.

Scenario 1 — parent orders lunch for a student at a subsidized public school that doesn't sell lunches itself. Virginia's nonprofit school exemption under 23 VAC 10-210-4020 A 1 applies to sales of tangible personal property TO nonprofit schools and institutions of learning, "for their use or consumption and paid for out of their funds." Section A 2 makes this explicit: the property or services must be purchased BY the educational institution, and individuals are not eligible for the exemption even if the institution later reimburses them. Because the taxpayer here is selling directly to the PARENT — not the school — these food sales are a taxable retail sale, regardless of the school's own funding status.

Scenario 2 — for-profit daycare with preschool through elementary students, no government funding. Under 23 VAC 10-210-4020 B, sales of tangible personal property to schools are taxable whenever the institution is run for profit. For-profit schools must pay tax to their vendors at purchase time unless buying for resale, and must separately collect tax on any meals sold to students unless the meal price is bundled into tuition, room, or board. The Department held the taxpayer must charge sales tax on sales to parents in this scenario, and sales to the school itself are also taxable unless the school provides a valid Form ST-10 resale exemption certificate under Va. Code § 58.1-623.

Scenario 3 — religious school where a parent (not the school) buys lunch through a third-party portal. Virginia Code § 58.1-609.11 provides nonprofit exemptions, and 23 VAC 10-210-310 H 2 generally exempts church-operated kindergartens, preschools, and day care centers (that aren't separate legal entities) on their own purchases of tangible personal property — and the Department has previously ruled that a church-affiliated school's OWN purchase of box lunches for its students qualified for that exemption (P.D. 96-196). But this scenario mirrors Scenario 1: the parent, not the school, is the one buying through the portal, and the school neither pays nor reimburses. Because the sale is to the parent, it's taxable just the same.

What this means for you

Food service providers selling to schools and daycares

The tax answer turns on WHO signs the check, not which kind of school the food ends up at. If a parent — rather than the school itself — is the one purchasing (even through an online ordering portal set up in coordination with the school), charge sales tax. Only a direct sale to the institution, paid from the institution's own funds, can qualify for exemption, and only if the institution is a genuine nonprofit (or a for-profit school properly buying for resale under a Form ST-10).

Nonprofit and religious schools that buy lunches to serve students

If your school itself purchases meals (rather than parents purchasing individually) to then serve to students, that purchase can potentially qualify for the nonprofit exemption under 23 VAC 10-210-310 H 2, following the same logic as P.D. 96-196. Structure the purchasing relationship accordingly if you want to preserve that exemption.

For-profit daycares and private schools

There's no exemption path here at all except the resale-certificate route: charge tax on meals sold to students (unless bundled into tuition/room/board), and only buy food tax-free from your supplier if you hold a valid Form ST-10 and are genuinely reselling it.

Common questions

Q: If a parent orders school lunch online, is that ever exempt because the school is nonprofit?
A: No. The nonprofit school exemption only applies when the SCHOOL itself is the purchaser, paying with its own funds — a parent's purchase is never exempt, even if the school later reimburses them.

Q: Does it matter if the school receives government subsidies?
A: Not for this purpose — what matters is who is actually buying the food, not how the school itself is funded.

Q: Can a for-profit daycare ever buy food tax-free from a caterer?
A: Only if it provides a valid Form ST-10 resale exemption certificate and is reselling the food (e.g., bundling the meal price into tuition) rather than simply providing it as a service.

Q: My church-run preschool buys box lunches directly to serve to students — is that exempt?
A: Potentially yes, following P.D. 96-196 and 23 VAC 10-210-310 H 2 — but only because the SCHOOL is the purchaser; if parents pay directly instead, the exemption doesn't apply.

Citations and references

Statutes and regulations:

• 23 VAC 10-210-4020 A 1 — nonprofit school exemption applies to purchases BY the institution, paid from its own funds
• 23 VAC 10-210-4020 A 2 — individuals are never eligible for the school exemption, even if reimbursed
• 23 VAC 10-210-4020 B — sales to for-profit schools are taxable; must collect tax on meals unless bundled into tuition/room/board
• Va. Code § 58.1-623 — resale exemption certificate (Form ST-10)
• Va. Code § 58.1-609.11 — nonprofit organization sales and use tax exemptions
• 23 VAC 10-210-310 H 2 — church-operated schools and day care centers generally exempt on their own tangible personal property purchases

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 25-1

Original ruling text

January 10, 2025

Re: Request for Ruling: Retail Sales and Use Tax

Dear *:

This is in response to your letter submitted on behalf of * (the “Taxpayer”) requesting a ruling on the application of the retail sales and use tax on the sales of school lunches to individual parents and various schools.

FACTS

The Taxpayer is a food service provider that prepares, sells, and delivers hot foods to preschools, daycares, private schools, and public charter schools. The Taxpayer offers breakfast, lunch, snacks, and beverages as well as bulk wholesale supplies. The Taxpayer requested a ruling regarding the taxability of its hot foods sales and presented three scenarios for consideration, each of which will be addressed separately below.

This response is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.

RULING

Scenario 1

A parent orders lunches through an online portal for their student who attends a public-school receiving government subsidies. The only lunch options for students are to (1) purchase lunch through a third-party online portal or (2) pack a lunch from home. The school itself does not offer lunches for purchase. Are sales to parents subject to sales tax because the parent does not have a sales tax exemption while the school does?

Title 23 of the Virginia Administrative Code (VAC) 10-210-4020 A 1 provides that, generally, the retail sales and use tax does not apply to sales of tangible personal property to nonprofit schools, colleges, and other institutions of learning for their use or consumption and paid for out of their funds. [Emphasis Added]. Title 23 VAC 10-210-4020 A 2 states in pertinent part that “ property or services must be purchased by the educational institution . Individuals are not eligible for the exemption even if they are reimbursed by the institution for their expenditures.” [Emphasis Added]. In this instance, the Taxpayer is a dealer, and food sales to the parents of students constitute a retail sale and are subject to sales tax.

Scenario 2

A daycare/early education facility operating for a profit has a mix of preschool, kindergarten, and elementary students. The school does not receive governmental funding. Is sales tax charged regardless of whether the parent or school purchases lunches for the students?

Title 23 VAC 10-210-4020 B provides that the sales of tangible personal property to schools, colleges, and other institutions of learning are taxable when the institution is conducted for profit. For-profit institutions are required to pay the tax to their vendors at the time of purchase unless their purchases are made for resale as dealers. All sales of tangible personal property made by such institutions are taxable. In addition, these institutions must collect the tax on any retail sales of meals to students or others if the price of the meals is not included in room, board, or tuition charges or fees.

In this scenario, the Taxpayer would need to charge sales tax on its sales to parents. Sales to the education facility would be taxable unless a valid Form ST-10, the exemption certificate for dealers purchasing tangible personal property for resale, is provided at the time of sale. See Virginia Code § 58.1-623.

Scenario 3

A religious school has lunches available for purchase from the school, or a third-party provider, or the student can bring a lunch from home. The parent purchases lunches through a third-party online portal. The school itself does not pay for the lunch nor does the school reimburse the parents for the lunches. Are such sales to these parents subject to sales tax?

Virginia Code § 58.1-609.11 provides sales and use tax exemptions for nonprofit organizations and entities. Title 23 of the Virginia Administrative Code (VAC) 10-210-310 H 2 provides in part that “kindergartens, primary schools, secondary schools, preschools, nurseries, day care centers, and similar activities held in the public church buildings that carry out the work and ministry of the church and that are not separate legal or business entities are generally exempt from the tax on the purchases of tangible personal property...” In Public Document 96-196 (8/14/1996), the Department ruled that sale of box lunches to a church-affiliated school that served the lunches to students qualified for the non-profit exemption.

Similar to the first scenario, the Taxpayer is selling food to the parents of students, and not directly to the school. As previously mentioned, food sales to parents are not tax exempt. As such, the Taxpayer should collect sales tax on its food sales to parents.

The Code of Virginia sections and regulations cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If there are any questions regarding this determination, please contact * in the Department’s Office of Tax Policy and Legislative Affairs, Tax Adjudication and Resolution Division, at , or via email **.

Sincerely,

James J. Alex

Tax Commissioner

Commonwealth of Virginia

AR\4397.F

Related Documents

96-98

96-196

08-158

16-64