October 7, 2011
SALES TAX EXEMPTION FOR FOOD AND OTHER ITEMS SOLD AT COLLEGES AND UNIVERSITIES
By: Rute Pinho, Associate Analyst
You asked (1) why UConn employees are exempt from paying sales tax on food and beverages they purchase on campus; (2) whether the exemption also applies to non-food items they purchase in the campus bookstore or other on-campus facilities; (3) whether it applies to faculty, staff, and students at other state universities or state employees in other state agencies; and (4) for the revenue loss associated with this tax exemption.
State law exempts from sales tax food, meals, candy, and beverages, except alcoholic beverages, sold at educational institutions to members of such institutions (CGS § 12-412 (9)). The exemption does not cover non-food items. The exemption applies not only to UConn students and employees, but to faculty, staff, and students at any preschool, elementary, secondary, postsecondary school, college, and university in the state. It extends to food and beverages sold at various locations on school grounds, including food courts, restaurants open to the public, and bookstores.
Textbooks purchased by full- and part-time students enrolled in higher education institutions are also exempt from sales tax, but the exemption does not extend to textbooks purchased by faculty or employees (CGS § 12-412 (109)).
The exemption for food products and meals sold at educational institutions dates back to the adoption of the sales tax in 1947 (PA 47-228). The legislative history of the act does not provide any insight into the rationale for this particular exemption. (There are no transcripts of the House debate and the Senate transcript is incomplete.)
According to the Office of Fiscal Analysis, the food and beverage exemption is expected to cost the state $25.7 million in FY 12. This includes $20.6 million for purchases made at the state's public and private colleges and universities and $5.1 million for purchases made at other educational institutions. The revenue loss associated with the college textbook exemption is estimated at $2.2 million for FY 12.
EXEMPTION FOR FOOD AND BEVERAGES AT SCHOOLS
CGS § 12-412 (9) exempts sales of food products, meals, candy, confectionary, and beverages, except alcoholic beverages, (1) in a student cafeteria, dining-hall, dormitory, fraternity, or sorority maintained in a private, public, or parochial school, college, or university and (2) to members of such institutions, including to those using prepaid meal plan cards or arrangements.
The exemption applies to:
1. students, faculty, staff, officers, regents, directors, and all other employees and volunteers at the schools, as long as they have cards identifying them as such and
2. all sales of food and beverages regardless of how they are served or sold or by whom they are sold.
While the statute refers specifically to sales in a student cafeteria, dining hall, dormitory, fraternity, or sorority, DRS interprets the exemption to also apply to additional places on the school grounds. This includes:
1. food courts;
2. classroom buildings;
3. restaurants open to the public;
4. office buildings; and
5. stores, including bookstores.
It does not include food and beverage sales (1) by outdoor vendors, other than vending machines; (2) at sporting or athletic events; and (3) when delivered from locations off school grounds, such as pizza deliveries. However, any purchases made with prepaid meal plan cards, at locations on or off school grounds, are exempt regardless of who the retailer is or where the purchases are made (DRS Special Notice (SN) 2003 (1)).
For your further information, we have enclosed a copy of DRS SN 2003 (1): “Exempt Sales of Food and Beverages at Schools and Care Facilities.”