Could a private snack-bar operator at a state school make tax-free sales to students or inmates while also selling to staff and visitors?

Plain-English summary

A private operator ran food-service facilities at state schools or institutions. Sales to students or inmates could be exempt when the operation was primarily for their benefit rather than for staff, visitors, or the general public.

Sales to school staff, guests, and visitors were taxable. The operator had to keep adequate records clearly distinguishing taxable staff and visitor sales from student or inmate sales. If it could not make that distinction, it was liable for tax on all sales.

Common questions

Could sales to students or inmates be exempt? Yes, under the stated primarily-for-their-benefit arrangement.

Were sales to staff and visitors exempt? No.

What records were required? Records clearly distinguishing the two categories of sales.

What if the operator could not separate them? All sales were treated as taxable.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8606L0739B06

Original ruling text

June 13, 1986

Dear ***:

Thank you for your letter asking for rewritten confirmation of the
information given to you by our auditor, *** during the
recent audit of your ***** food service facilities.

*** had asked whether a snack bar operated by **
for the benefit of the inmates or students at the **** under an
agreement with the School Administration could make tax free sales to the
students or inmates.

*** informed you correctly that sales to the school staff, guests
and visitors were taxable, but that sales to the students or inmates could be
exempted. You now wish to allow your other private enterprise operations
located in other state schools the opportunity to offer the exemption to
their students or inmates and want clarification.

Your other operators are eligible so long as the food service is primarily
for the benefit of the students or inmates instead of the school staff and
visitors or general public. In addition, if the operator, makes sales to
members of the school staff or visitors, tax must be collected and adequate
records must be kept which clearly distinguish between sales to school staff
or visitors and to students or inmates. The operator will be held liable for
tax on all sales if the distinction cannot be made.

If you have any questions or need more information, please call us at
1-800-252-5555 toll-free from anywhere in Texas. You may write us at
the Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division