Which sales at a university dining facility open to the public may be exempt from Illinois Retailers' Occupation Tax?

Plain-English summary

A university dining facility open to the public generally had taxable sales, with a narrow accommodation for meals the university sold to housing students on meal plans through an auditable tracking system.

Under 86 Ill. Adm. Code 130.2005(b)(4)(A), a school did not incur Retailers' Occupation Tax on a cafeteria operated on school premises when sales were confined to the school's students and employees. If the facility opened to other people, all sales made while that condition continued were taxable.

Narrow meal-plan accommodation in a public facility

For a university without a separate dormitory dining facility, Illinois allowed tax-free meal sales in a central facility open to the public only when:

• The university itself made the sale.
• The buyer was a student living in university housing.
• The student had purchased a meal plan.
• The university used an auditable and verifiable system to identify and document the sale at or before purchase.

Showing an identification card alone was not enough. Credits could support exempt sales only if they identified the qualifying housing students with meal plans. No cash sales could be exempt under this accommodation.

Meals sold to employees and other people in a facility open to the public were taxable.

Private campus restaurants and non-food items

The GIL cites Subway Restaurants v. Topinka for the conclusion that a restaurant leasing campus space was not the university's agent and did not qualify for the university exemption. The Department also states that the school itself had to make the qualifying sales.

All campus sales of non-food items were taxable regardless of who bought them, including sales made by the school.

What this means for you

University dining administrators

Separate closed student-and-employee cafeterias from facilities open to the public. In an open facility, document the narrow housing-student meal-plan sales through a system that can be audited sale by sale.

Students using credits or cards

The payment label did not control. Credits supported exempt treatment only when the system tied the transaction to a student living in university housing who had purchased a meal plan.

Faculty, staff, guests, and the public

Meals sold to these buyers in an open facility were taxable under the GIL. Cash sales could not use the housing-student accommodation.

Common questions

Q: Were meals in a closed dormitory cafeteria exempt?
A: Yes when the school operated it on campus and confined sales to students and employees.

Q: Could a housing student's meal-plan purchase be exempt in a public dining hall?
A: Yes under the accommodation, if the university made the sale and used an auditable, verifiable system to identify the student and meal-plan transaction.

Q: Was a student ID card enough?
A: No. The GIL required more than simply showing identification.

Q: Were meals sold to faculty or staff in a public facility exempt?
A: No.

Q: Were non-food items exempt when sold to students?
A: No. The GIL says all non-food campus sales were taxable regardless of the purchaser.

Citations and references

• 35 ILCS 120/2 — Illinois Retailers' Occupation Tax.
• 86 Ill. Adm. Code 130.2005(b)(4)(A) — school cafeteria and dining-facility rule.
• Subway Restaurants v. Topinka, 322 Ill. App. 3d 376, 751 N.E.2d 203 (2001) — private campus restaurant was not the university's agent for exemption purposes.

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2011.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2011/st-11-0108.pdf

Original ruling text

ST 11-0108-GIL 12/28/2011 EXEMPT ORGANIZATIONS
This letter discusses the sales tax liabilities of university dining facilities that are open to the
public. See 86 Ill. Adm. Code 130.2005. (This is a GIL.)

December 28, 2011

Dear Xxxxx:
This letter is in response to your letter dated June 21, 2011, in which you request information.
The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are issued by the
Department in response to specific taxpayer inquiries concerning the application of a tax statute or
rule to a particular fact situation. A PLR is binding on the Department, but only as to the taxpayer
who is the subject of the request for ruling and only to the extent the facts recited in the PLR are
correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in the
Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information Letter
(“GIL”) is to direct taxpayers to Department regulations or other sources of information regarding the
topic about which they have inquired. A GIL is not a statement of Department policy and is not
binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to your
inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
This is a request for a General Information Letter pursuant to the provisions of 2 Ill.
Admin. Code 1200.
The University is requesting information from the Illinois
Department of Revenue regarding whether the Illinois Retailers' Occupation Tax applies
to gross receipts of meals to students, faculty, and staff.
The University is among the preeminent public universities of the nation and is a world
leader in research, teaching, and public engagement, distinguished by the breadth of its
programs, broad academic excellence, and internationally renowned faculty.
The University is currently undertaking major renovations to University residence halls,
and this project will be ongoing over the next decade. The first phase is now complete
which includes a new state of the art dining facility that offers more dining choices. The
renovations include upgrades to both the food service and seating areas. Several
stations positioned throughout the main dining area offers [sic] more choices of
entrees/salads/desserts. In addition, other dining options and convenience type stores
are located throughout the residence complex for the purchase of ala-carte [sic] type
items, both food and non-food. The facility is available to students, faculty, staff, guests
of students, and guests of the University. It is operated as a cashless system.
Meals plans are available for purchase for University students only as a declining
balance system encoded on their University ID card. They are available to both

students with University housing contracts and students without University housing
contracts (i.e., live in private housing and/or apartments.)
Students, faculty, and staff may buy ‘extra credits’ for flexibility of purchases from
certain University locations. ‘Extra credits’ are not considered part of a meal plan.
These ‘extra credits’ may be used to purchase meals at any of the dining facilities,
food/beverage or personal items at convenience stores, ala-carte [sic] food, other nonfood/beverage items, and limited services (such as, laundry and printing/copies).
All facilities also accept credit cards.
LAW REFERENCES
1)
2)
3)
4)
5)

Illinois Retailers' Occupation Tax 35 ILCS 120/2 and Regulation 86 Part III
Admin. Code Section 130.120
Illinois Regulation Title 86 Part 130 Section 130.2005(b)(4)
Private Letter Ruling ST 95-0195 issued May 12, 1995
Private Letter Ruling ST 01-0004 issued February 14, 2001
Private Letter Ruling ST 02-0023 issued August 13, 2002

INFORMATION REQUESTED
The University is interested in acquiring answers to the following questions for
compliance purposes.
MEAL PLANS:
1)

Would all meal plan purchases be taxable for students with University Housing
contracts exempt from sales tax?

2)

Would all meal plan purchases be taxable for students without University
Housing contracts?

EXTRA CREDITS:
1)

Would all food purchases by ‘Extra Credits’ be taxable for students with
University Housing contracts?

2)

Would all food purchases by ‘Extra Credits’ be taxable for students without
University Housing contracts?

3)

Would all food purchases by ‘Extra Credits’ be taxable for faculty and staff?

4)

Would all food purchases by ‘Extra Credits’ be taxable for student guests or
University guests?

CREDIT CARDS:
(1)

Would all food purchases by credit card be taxable for students with University
contracts?

(2)

Would all food purchases by credit card be taxable for students without
University contracts?

(3)

Would all food purchases by credit card be taxable for faculty and staff?

(4)

Would all food purchases by credit card be taxable for student guests or
University guests?

(5)

Would all food purchases by credit card be taxable for conference and camp
attendees?

Please contact me if you have any questions or require additional information.
Thank you for your assistance in this matter.

DEPARTMENT’S RESPONSE:
A review of the Department’s position regarding sales of food in campus cafeterias and dining
facilities may be helpful. As stated in the Department’s regulation at 130.2005(b)(4)(A):
A school does not incur Retailers’ Occupation Tax liability on its operation of a cafeteria
or other dining facility which is conducted on the school’s premises, and which confines
its selling to the students and employees of the school. In any instance in which the
dining facility is opened up for the use of other persons, all sales that are made at such
facility while that condition continues to prevail are taxable.
In a college campus setting, this has meant that sales of meals by the university to students
and employees in a closed dormitory cafeteria were exempt, but all food sales in a student uniontype-setting open to the public, including sales to students and employees, were taxable. The
restricted cafeteria exemption has been available to schools for many years and is supported by 86
Ill. Adm. Code 130.2005(b)(4)(A). The school would incur Retailers’ Occupation Tax liability if it
should engage in selling any of the same items to the public.
The regulatory provisions and the closed cafeteria concept have served two purposes. The
first purpose served by the closed cafeteria concept is to solve the practical impossibility that the
Department would face when auditing an open facility in verifying that all of the sales claimed to be
exempt were, in fact, made to students and employees of the school. The second purpose served by
the closed cafeteria concept is the protection of retailers in competition with the school’s open facility.
That is, student union type (open to the public) selling competes with area food service
establishments for student purchases as well as for purchases by the public.
As an accommodation to schools that sell meal plans but have no separate dormitory food
facility, the Department has allowed universities to make tax-free sales of meals to students in a
central food facility open to the public. Such sales by a university may be made tax free in a campus
cafeteria that is open to the public only if there is a mechanism for identifying and documenting, at or
before the time of sale, the nontaxable sales of food to students living in university housing and
enrolled in a meal plan. The mechanism for identifying and documenting such sales to such students,
however, must consist of something more than simply showing an identification card. These
mechanisms must consist of systems that provide both an auditable and verifiable record of food
sales to each of those students.
Please note that in order to avoid problems of competition, the Department has limited tax-free
sales of food by the school in facilities open to the public to students who live in university housing

and have purchased a meal plan. These sales can only be made tax-free if the school has a program
in place that allows appropriate students to be identified in an auditable and verifiable record system.
No sales paid for with “credits” may be made tax exempt unless the “credits” can identify students
living in university housing that have purchased a meal plan. No cash sales may be made tax
exempt. Meals sold to employees of the school and others are subject to tax in facilities open to the
public.
Over time, the Department has become aware that on campus food services have expanded
to include various additional kinds of vending arrangements. The Department recognizes that the
selling of meals by a university in a food facility open to the public may not be done tax-free except to
students who live in university housing and have bought a meal plan. For this, there must be an
auditable and verifiable record system in place for tracking these sales.
In 2001, the Illinois Fourth District Appellate Court decided in the case of Subway Restaurants
v. Topinka, 322 Ill.App.3d 376, 751 N.E.2d 203 (2001), that a restaurant selling food on campus was
not an agent of the university for purposes of tax exemption. The restaurant also was not a wholesale
provider of products to the university for purposes of tax, and the university was not a purchaser of
the restaurant’s products for purposes of an exemption from tax. Therefore, even though the
restaurant operated in a space that it leased from the university, none of the sales made by the
restaurant qualified as exempt from sales tax.
It is the Department’s position, as articulated in the regulation (86 Ill. Adm Code
130.2005(b)(4)(A)), that it must be the school itself that makes such sales. This policy was affirmed
by the Subway case discussed above.
Please note that all sales of non-food items on campus, including sales made by the school,
are subject to tax regardless of who purchases them. This is ongoing competitive selling.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.
Very truly yours,

Debra M. Boggess
Associate Counsel
DMB:msk