How does Georgia sales tax apply to a senior-living facility's mandatory dining allowance and extra meal charges for long-term independent-living residents?

Plain-English summary

A senior-living complex charged independent-living residents a monthly service fee covering long-term accommodations and services. A mandatory dining allowance was built into that fee. Residents chose meals from individually priced dining options, but unused allowance expired; meals beyond the allowance produced a separate overage charge.

The Department ruled that the monthly fee and mandatory dining allowance were non-taxable service charges. The food allowance was an integral part of the long-term accommodation service, so the facility was the consumer of the food and had to pay state and local sales or use tax when purchasing food and ingredients used for included meals.

Overages were different. Once residents bought food beyond the mandatory allowance, the optional charge was a separate retail sale like a restaurant purchase. The facility had to register as a dealer and collect state and local tax on those overage sales; it could purchase the food components for those retail sales tax-free for resale.

What this means for you

Senior-living facilities

Separate mandatory meal benefits integral to long-term accommodation from optional food sold beyond the included benefit. The facility pays tax on food used for included service meals but collects tax from residents on separately sold overage meals.

Assisted-living and care operators

The ruling compares senior-living service arrangements with hospitals, nursing homes, and communal student housing, where meals can be an integral part of the broader service. Pricing and contractual limits determine when an additional food sale begins.

Accountants and tax professionals

Track food inventory between service use and resale. Food consumed in providing the included accommodation service is taxable to the facility; food later resold through taxable overages may be bought under a resale certificate or support a credit or refund for tax previously paid.

Common questions

Q: Is the mandatory dining allowance taxable to the resident?
A: No. It was an allocated part of the non-taxable monthly long-term accommodation service fee.

Q: Who pays tax on food used for included meals?
A: The facility pays state and local sales or use tax when purchasing the food and ingredients because it consumes them in providing the service.

Q: Are meal charges above the allowance taxable?
A: Yes. Overages are optional retail sales outside the included service, whether the purchase is a full meal or a café item.

Q: Must the facility register for sales tax?
A: Yes when it makes taxable overage sales. It must register as a dealer and collect and remit tax on those charges.

Q: Can another senior-living facility rely on this ruling?
A: No. It is limited to the requesting taxpayer and facts, including the long-term agreements, mandatory allowance, and overage structure.

Citations and references

Statutes and rules:

• O.C.G.A. § 48-8-30 (sales and use tax imposition and collection)
• O.C.G.A. §§ 48-8-2(31) and (33)(A) (retail sale and sale)
• O.C.G.A. § 48-8-35 (dealer liability for uncollected tax)
• O.C.G.A. § 48-8-63 (service providers as consumers)
• Ga. Comp. R. & Regs. r. 560-12-2-.65 (food sales and communal living)
• Ga. Comp. R. & Regs. r. 560-12-2-.50 (institutions and accommodations)
• Ga. Comp. R. & Regs. r. 560-12-2-.104(4)(b)(1)(iii) (nursing homes as service providers)

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2018-03

Original ruling text

Georgia Letter Ruling: LR SUT-2018-03
Topic: Accommodations, Sales Price
Dated: March 26, 2018
This letter is in response to your letter ruling request dated March 20, 2017, regarding the application of Georgia sales
and use tax to certain charges made by your client.
Facts Presented By Taxpayer
[Redacted] (“Taxpayer”) manages a senior living housing complex [Redacted] (the “Facility”). Taxpayer offers
residents at the Facility a wide variety of services (e.g., housekeeping, utilities, security, maintenance, local
transportation, etc.) and amenities (e.g., a library, a media lounge, a salon/spa, concierge healthcare, and a state-of theart health and wellness center). Additionally, Taxpayer provides residents at the Facility with a variety of dining
options, including full-service fine dining and a café.
All residents at the Facility enter into a rental agreement with the Taxpayer and pay the Taxpayer a monthly fee (the
“Monthly Service Fee”). The Monthly Service Fee includes the charge for residents’ accommodations, as well as
various services that the Taxpayer offers. Each rental agreement for independent living residents requires residents to
have a monthly dining allowance (the “Dining Allowance”), which is included in the total price of the Monthly Service
Fee.
The Dining Allowance is a defined portion of the Monthly Service Fee that the independent living resident can apply
toward food and beverages available at the Facility. The Dining Allowance is mandatory for all independent living
residents at the Facility. Independent Living residents dining at the Facility charge the price of their meals against
their monthly Dining Allowance, thereby reducing the amount of Dining Allowance available. To the extent an
independent living resident exceeds his or her allotted monthly Dining Allowance, Taxpayer would bill the resident
for the excess (the “Overage”). In the event an independent living resident does not fully utilize his or her monthly
Dining Allowance, the resident is not permitted to carry forward any unused Dining Allowance and still remains liable
for the entire Monthly Service Fee. 1 The Dining Allowance is priced so that most independent living residents will
come close to, but not exceed, their monthly Dining Allowance.
Although all independent living residents are required to have a Dining Allowance, the purpose of the Dining
Allowance is to provide independent living residents with flexibility regarding their meal consumption and dining
options. For instance, residents are able to decide for themselves whether to dine at the dining hall or café, and they
are able to allocate how much of the Dining Allowance they spend each meal. Additionally, guests of an independent
living resident are able to dine at the Facility, if accompanied by the resident. A guest may purchase a meal by either
charging the meal to a resident’s Dining Allowance or paying for the meal directly. Meals provided to independent
living residents and their guests are individually priced, so that the residents can manage their Dining Allowance.
In contrast to independent residents, residents in assisted living and memory care units do not have a monthly Dining
Allowance. Rather, Taxpayer provides three meals a day to these residents in the dining hall. The cost of these meals
is included in the Monthly Service Fee paid by the assisted living and memory care residents. Taxpayer purchases the
same bulk food and food ingredients for all care levels.
Taxpayer is not registered with the Department as a dealer and does not have a Georgia sales tax license. Taxpayer
pays the applicable Georgia state and local sales tax when it purchases the food and beverages that it serves to its
residents. Taxpayer does not collect Georgia sales tax on the Monthly Service Fee, the Dining Allowance included
therein, or any Overage it may charge its residents.
Issue
Is Taxpayer a service provider who should pay the applicable state and local sales tax on the purchase of food and
food ingredients it uses to prepare meals for its residents, or is Taxpayer making taxable retail sales of food?

The Independent Living Agreement between Taxpayer and a resident provides that if a resident is absent from the
Facility for more than 14 consecutive days during a given month, the resident may request a credit of the Dining
Allowance up to $10/day.
1

Georgia Letter Ruling: LR SUT-2018-03
Topic: Accommodations, Sales Price
Dated: March 26, 2018
Page 2 of 4
Analysis
Imposition of Sales and Use Tax
Georgia levies and imposes a tax (subject to certain exemptions) on the retail purchase, retail sale, rental, storage, use,
or consumption of tangible personal property and on certain enumerated services. 2 “Retail sale” means any sale, lease,
or rental for any purpose other than for resale, sublease, or subrent. 3 “Sale” means any transfer of title or possession,
exchange, barter, lease, or rental, conditional or otherwise, in any manner, or by any means of any kind of tangible
personal property for a consideration. 4
Although sales of most services are not taxable retail sales, “retail sale” includes the sale or charges for any room,
lodging, or accommodation furnished to transients by any place in which rooms, lodgings, or accommodations are
regularly furnished to transients for a consideration. 5 However, sales tax does not apply if the rooms, lodgings, or
accommodations are supplied for a period of 90 continuous days or more (“Long-Term Accommodations”, and those
less than 90 continuous days, “Short-Term Accommodations”).
Every person making a sale of tangible personal property at retail in this state or furnishing a service the purchase of
which is a retail sale is a dealer and generally must collect the tax from the purchaser or consumer and pay the tax
over to the Department. 6 Unless the dealer chooses to absorb the tax, the dealer must add the tax to the sales price or
charge. Any dealer who neglects, fails or refuses to collect the tax upon a retail sale of tangible personal property
made by him shall be liable for and shall pay the tax himself. 7 The dealer is liable for a tax on the sale at the state rate
of 4 percent of the sale price plus applicable local tax at a rate that varies by local jurisdiction. 8
Sales of services are not subject to the tax unless specifically designated as taxable. “A purchase of tangible personal
property to be transferred to another in the course of providing a service, is a taxable retail transaction, even though
the actual consumption of the item is made by the recipient of the service . . .” 9 Thus, a service provider (whether the
service is taxable or not) is the end user and consumer of tangible personal property and, as such, is liable for sales
and use tax on all purchases of tangible personal property and taxable services used to provide the service. 10

O.C.G.A. §§ 48-3-1 and 48-8-30.
O.C.G.A. § 48-8-2(31).
4
O.C.G.A. § 48-8-2(33)(A).
5
O.C.G.A. § 48-8-2(31).
6
O.C.G.A. § 48-8-30(b)(1).
7
O.C.G.A. §§ 48-8-30 and 48-8-35.
8
O.C.G.A. §§ 48-8-1, 48-8-30, 48-8-32, 48-8-80, 48-8-100, 48-8-109.1, 48-8-110, 48-8-140, 48-8-200, 48-8-240, 488-260, 48-8-269.7, and 48-8-269.22; The MARTA Act of 1965, as amended.
9
L. M. Berry & Company v. Blackmon, 129 Ga App 347 199 (1973). See also Atlanta Americana Motor Hotel
Corp. v. Undercofler, 222 Ga. 295 (1966) (holding that purchases of items of tangible personal property for use in
rooms furnished to paying guests are taxable purchases and or not tax-free purchases for resale).
10
See O.C.G.A. § 48-8-63 (While this statute generally addresses the tax treatment of people who contract to furnish
tangible personal property and to perform services, the tax treatment would be the same for people who contract
only to perform services, i.e., in either case the person is the consumer of tangible personal property and owes tax on
its purchases of tangible personal property); see also Ga. Comp. R. & Regs. r. 560-12-1-.14(7) (stating the general
rule for all service providers in the context of property withdrawn from inventory for use by a service provider).
2

3

Georgia Letter Ruling: LR SUT-2018-03
Topic: Accommodations, Sales Price
Dated: March 26, 2018
Page 3 of 4
Retail Sales and Uses of Food; Food and Accommodations
Generally, retail sales of food and food ingredients by restaurants, hotels, clubs, cafes, caterers, boarding houses, and
others are taxable transactions. 11 Accordingly, those business entities purchase food tax free for resale and are required
to remit the applicable state and local sales tax on the sale of the prepared food. 12 In contrast, some entities offer or
provide food as an integral component of a related service transaction. Because service providers generally are the
consumers of tangible personal property used during the provision of a service, subject to limited exceptions, they are
liable for the tax on the purchase of food when it is used as a critical component of a service transaction.
Hospitals and nursing homes are service providers that are the users of all tangible personal property purchased for
use in connection with the operation of those institutions. 13 Providing nourishment to patients is an essential
component that is integrally related to the caregiving services administered by hospitals and nursing homes. As a
corollary result, and in contrast to restaurants and hotels which purchase food tax free for resale because they are not
considered service providers for taxation purposes, hospitals and nursing homes are required to pay tax on food at the
time of purchase because they use that food to provide their respective services. 14
Like hospitals and nursing homes, student societies with communal living are service providers who provide food or
meals as one component part of their accommodation services. Fraternities, sororities and other student societies, with
members residing at a common location and jointly sharing household expenses (including food) are not considered
to be making retail sales of food to members. Instead, the organization’s purchase of food is subject to the tax. 15
In connection with accommodations that have a food component, it is important to distinguish the taxable differences
between Short-Term accommodations and Long-Term Accommodations. Specifically, because Short-Term
Accommodations are taxable, all additional underlying charges that are also part of a guest’s invoice are taxable as
well. For Long-Term Accommodations, which are not taxable, for so long as mandatory food charges constitute an
integral component of the underlying Long-Term Accommodation, then such food is also provided tax-free to the
recipient. Generally speaking, when a provider of Long-Term Accommodations starts selling food that is not
considered mandatory, and as such, not integral to the Long-Term Accommodation itself, the provider becomes a
seller of tangible personal property and is required to register as a dealer and fulfill all sales tax compliance
obligations. 16
Taxpayer’s Monthly Service Fee
Taxpayer, as it relates to its independent living residents, is primarily engaged in the business of rendering services:
Long-Term Accommodations with certain related components. Thus, payment of the Monthly Service Fee is not
subject to sales tax because the fee is a charge for rendering services which are not specifically enumerated as taxable.
Dining Allowance
A mandatory and integral portion of the Monthly Service Fee is designated as the Dining Allowance, which basically
serves as a monthly food/meal allotment. When it comes to food and meals, the independent living residents have the
option to eat at multiple dining establishments, with each establishment having specific itemized pricing similar to
that which would be included on a traditional restaurant menu. Taxpayer’s provision of food (within the mandatory
Dining Allowance), although it appears similar to provisions found at a typical restaurant, is still nothing more than a
providing an integral component part of Taxpayer’s Long-Term Accommodation services. Serving food to
independent living residents (and sometimes guests) is an essential part of the accommodation services being provided
Ga. Comp. R. & Regs. r. 560-12-2-.65.
Id.
13
Ga. Comp. R. & Regs. r. 560-12-2-.50(1)
14
See Ga. Comp. R. & Regs. r. 560-12-2-.104(4)(b)(1)(iii) (Rule presumes that day care centers and for-profit nursing
homes are service providers who use food in providing a service).
15
Ga. Comp. R. & Regs. r. 560-12-2-.65. See also Ga. Comp. R. & Regs. r. 560-12-2-.23(4) (distinguishing the taxable
retail sale of meals to college students from the college’s use of food paid for by room, board, and tuition charges).
16
Ga. Comp. R. & Regs. r. 560-12-2-.50(3)
11
12

Georgia Letter Ruling: LR SUT-2018-03
Topic: Accommodations, Sales Price
Dated: March 26, 2018
Page 4 of 4
at the Facility. As such, the mandatory Dining Allowance is simply an allocated component of the overall non-taxable
Monthly Service Fee.
Overages
While neither a resident’s payment nor use of the Dining Allowance is a taxable transaction, the payment of any
Overages warrants further analysis. Service providers may provide certain features as part of a service but also
separately make retail sales of these features. For example, an inn may provide breakfast as part of an accommodation
but also sell food in the same location at lunch. 17
Here, Taxpayer, through its Monthly Service Fee, does not provide its independent living residents with a dwelling
and unlimited services. For example, Taxpayer provides certain standard utilities as part of the underlying
accommodation service but requires residents to separately coordinate and purchase premium cable. Additionally,
Taxpayer provides some basic social programs as part of the accommodation service but charges extra for special
activities. 18 With respect to food, Taxpayer includes a base amount of food as part of its charge for Long-Term
Accommodations, but the food component of Taxpayer’s services is limited to the monthly allotted Dining Allowance.
In fact, as a byproduct of the Taxpayer setting the Dining Allowance at a certain price point, the Taxpayer itself has
made the determination as to when food should no longer be considered a mandatory and integral component of the
accommodation services.
When a resident exceeds his or her base Dining Allowance, the resident is required to pay an Overage to obtain
additional food. The Overage is the charge for Taxpayer to transfer tangible personal property to a resident or guest.
Such transactions are optional and distinct from both the Dining Allowance and the bundle of other services offered
by Taxpayer in exchange for the Monthly Service Fee. Instead, these transactions are akin to the purchase of food at
a traditional restaurant. As such, all Overages incurred, whether an entire meal in the dining room or a cup of coffee
in the café, are taxable as retail sales because those purchases of food or any other tangible personal property are
outside the scope of Taxpayer’s services (i.e. not covered by the Monthly Service Fee).
Rulings
Taxpayer provides rooms and related important amenities to independent seniors for a Monthly Service Fee. In doing
so, Taxpayer is primarily a service provider and must pay state and local sales and use tax on the purchase of food and
food ingredients that it uses to provide meals which are a part of its long-term accommodations.
To the extent Taxpayer, in exchange for additional consideration, provides a resident with tangible personal property
that is not included as part of Taxpayer’s services, Taxpayer is making a retail sale. Since retail sales are subject to
state and local sales and use tax, Taxpayer must register with the Department as a dealer and remit tax on the Overages,
which are the sales prices of the meals that are outside the scope of Taxpayer’s services. When Taxpayer makes retail
sales of food, Taxpayer can purchase the component food and food ingredients tax-free for resale. 19
The opinions expressed in this ruling are based upon the information contained in your request and limited to the
specific transactions, facts, circumstances and taxpayer in question. Should the circumstances regarding the
transactions change or differ materially from those represented, this ruling may become invalid. In addition,
subsequent statutory or administrative rule changes or judicial interpretations of the statutes or rules upon which this
advice is based may subject similar future transactions to a different tax treatment than that expressed in this ruling.

17
See generally O.C.G.A. § 48-8-39, Ga. Comp. R. & Regs. r. 560-12-1-.17 and r. 560-12-2-.23(4) (showing that a
taxpayer may use tangible personal property as a service provider and also make retail sales of like tangible personal
property).
18
See Independent Living Rental Agreement, p. 4-5.
19
Inventory may be purchased exempt for resale by providing the supplier with a properly completed ST-5 Certificate
of Exemption. Alternatively, Taxpayer may submit a refund claim or take a credit for tax paid on the cost of goods
which are later resold.