Is food sold to nursery, kindergarten, elementary or secondary students at a school cafeteria on the premises subject to New York sales tax?

Plain-English summary

Potsdam Auxiliary and College Educational Services, Inc. operates the auxiliary services — food service, college store, and vending — at the State University College of Arts and Science at Potsdam. The college's Campus Learning Center runs a nursery, kindergarten, elementary and secondary program, and the petitioner provides a daily lunch program there. It asked whether sales tax is due on food and drink sold to those students at the on-premises cafeteria.

The Department held the meals are excluded from sales tax.

• Food and drink are normally taxable. Section § 1105(d)(i) taxes food and drink sold by restaurants, cafeterias and similar establishments.
• But there's a school-cafeteria exclusion. Section § 1105(d)(ii)(B) excludes food or drink sold to a student of a nursery, kindergarten, elementary or secondary school at a restaurant or cafeteria on the premises of the school — provided the school is operated by an exempt organization described in § 1116(a), or is otherwise created, incorporated, registered or licensed under the education law (or by the Regents / Commissioner of Education).
• Potsdam qualifies. The State University College at Potsdam, which operates the Campus Learning Center, is an organization described in § 1116(a). So the daily lunches sold to the Center's students on the premises are excluded from sales tax under § 1105(d)(ii).

What this means for you

School cafeteria meals for young students can be sold tax-free — but the conditions are specific. The exclusion applies when three things line up: the buyer is a student of a nursery, kindergarten, elementary or secondary school; the sale happens at a cafeteria or restaurant on the school's premises; and the school is run by a § 1116(a) exempt organization or is otherwise chartered/licensed under the education law.

Who operates the school matters. The tax-free status here flowed from the operating institution — the State University College — being a § 1116(a) organization. A private, for-profit lunch operation that doesn't meet the school-operator condition wouldn't get the same treatment.

The exclusion is keyed to the grade levels named in the statute. It covers nursery through secondary students. Food sold to college students, faculty, staff, or the general public at the same institution is governed by the ordinary food-and-drink rules, not this exclusion.

Common questions

Q: Does the caterer or food-service operator have to be the tax-exempt entity?
A: No — the statute looks to who operates the school. Here the food service is run by the petitioner, but the exclusion applies because the school (the Campus Learning Center) is operated by the State University College, a § 1116(a) organization.

Q: Would meals sold to college students at Potsdam also be exempt under this ruling?
A: No. Section 1105(d)(ii)(B) covers students of nursery, kindergarten, elementary or secondary schools. College-level sales aren't within this particular exclusion.

Q: Does the meal have to be eaten at the school?
A: The exclusion is for food and drink sold to the qualifying students at a restaurant or cafeteria located on the premises of the school — that on-premises sale is what the statute covers.

Citations and references

Statutes:

• Tax Law § 1105(d)(i) — tax on food and drink sold by cafeterias and similar establishments
• Tax Law § 1105(d)(ii)(B) — exclusion for on-premises cafeteria food sold to nursery/kindergarten/elementary/secondary students
• Tax Law § 1116(a) — exempt organizations

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a81_49s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-81(49)S
Sales Tax
November 17, 1981

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S810513A

On May 13, 1981 a Petition for Advisory Opinion was received from Potsdam Auxiliary and
College Educational Services, Inc., State University College at Potsdam, Potsdam, New York 13676.
The issue raised is whether sales tax is due on receipts from the sale of food and drink to a
student of a nursery school, kindergarten, elementary or secondary school at a cafeteria located on
the premises of such a school.
Petitioner operates the auxiliary services at the State University College of Arts and Science
at Potsdam. These include food service, college store and vending. Included in the college program
is the Campus Learning Center which maintains a nursery, kindergarten, elementary and secondary
program. Petitioner supplies a daily lunch program in the Campus Learning Center.
Section 1105(d)(ii) of the Tax Law states, in part, "The tax imposed by this subdivision shall
not apply to: . . . (B) food or drink sold to a student of a nursery school, kindergarten, elementary or
secondary school at a restaurant or cafeteria located on the premises of such a school . . . provided
the school . . . described in this paragraph is operated by an exempt organization described in
subdivision (a) of section eleven hundred sixteen, or is created, incorporated, registered or licensed
by the state legislature or pursuant to the education law or the regulations of the commissioner of
education, or is incorporated by the regents of the university of the State of New York or with their
consent or the consent of the commissioner of education as provided in section two hundred sixteen
of the education law; . . ."
The State University College at Potsdam, which operates the Campus Learning Center, is an
organization described in section 1116(a) of the Tax Law. Therefore, Petitioner's sales of food and
drink to students of the Campus Learning Center on the premises of such school are excluded from
sales tax pursuant to section 1105(d)(ii).

DATED: October 29, 1981

JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR