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Status and Impact of Sales Tax on
Food at Minnesota State Colleges and Universities
Included in the Conference Committee Report on House File Number 2498, passed May 2002, is language that pertains to sales tax on food sold at college and universities in Minnesota. The language reads as follows:
Sec. 7. Minnesota Statutes 2000, section 297A. 67, subdivision 5 is amended to read: private elementary, middle, or secondary schools, as defined in section 120A.05 are exempt. Meals and lunches served to students at a college, university, or private career school under a board contract are exempt. For purposes of this subdivision, "meals and lunches" does not include sales from vending machines.
[EFFECTIVE DATE.] This section is effective for sales and purchases made after June 30, 2002. However, for vending machine contracts entered into by a school, as defined in section 120A.05, prior to May 30, 2002, food sales from vending machines continue to be exempt under this subdivision for one year after the effective date of the contract.
The language on exempt meals narrows the sales tax exemption for meals served at colleges, universities, and private schools to only those meals served to students under a board contract. Effective, July 1, 2002, those institutions that do not have a room and board or board contract will be subject to tax on meals served at the institution. If an institution does have a contract in place, they will be exempt from sales tax on meals.
The language on exempt meals clarifies that food sold from vending machines does not qualify for this exemption, and is taxable at all institutions. The exemption in the language that allows a "school" with a contract already in place by May 30, 2002, to continue to be exempt for one year after July 1, 2002 to allow for a transition period for existing contracts, ONLY applies to K-12 schools. It does not apply to MnSCU institutions according to the legislature and Department of Revenue. According to Minnesota Statute 120A.05, a "school" includes elementary and secondary schools only. the reason K-12 schools are exempt is because the decision to include them in this language took place two days prior to the end of session, which is why they have been given a year transition period.
In the past, the Department of Revenue has broadly interpreted "meals and lunches" to include all food sold at an institution, whether that's vending machine sales, meals, or concessions. This is not the intent of the language and starting July 1, 2002, all food, with the exception of meals served with a board contract, will be taxed.
This includes the language in the bill regarding "prepared food", which includes concessions that are sold at sporting events, food carts in the student union, etc. The language reads as follows:
Sec. 4. Minnesota Statutes 2001 Supplement, section 297A.61, subdivision 31, is amended to read:
Subd. 31. [PREPARED FOOD.] "Prepared food" means food that meets either of the following conditions:
Starting July 1, 2002, this language will effect all of our institutions. If your institution sells "prepared food", which is food sold with eating utensils, as explained in the above language, or food sold heated or two or more ingredients are combined and sold as a single item, then that food is subject to sales tax. With the new language there is a modification to the definition of "prepared food" that includes exemptions. They are as follows:
Taxable prepared food also includes candy, which includes, but is not limited to; breath mints, candy bars, chocolate chips, fruit roll-ups, marshmallows, caramel corn, honey roasted peanuts, sugarless candy, and gum. The exemption for food products, as defined by the multistate Streamlined Sales Tax Project does not apply to candy, because it is considered a "preparation" of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts, or other ingredients.
Other taxable items include, soft drinks, which includes, but is not limited to; bottled or canned water that contains sweeteners, coffee and tea drinks that contain sweeteners, sports drinks, and soda pop. The exemption for food products does not apply to soft drinks. Food that is not taxable, according to the multistate Streamlined Sales Tax Project definition, ends up being served by an eating establishment, which includes, but not limited to; snack carts, concession stands, and sidewalk vendors. See Fact Sheet 137 on the Minnesota Department of Revenue web page for more detail. http://www.taxes.state.mn.us/salestax/factshts/salestax/1370102.pdf
As more information becomes available, the Department of Revenue will provide us with it. If you have any questions, you may direct them to Melissa Fahning at melissa.fahning@so.mnscu.edu or at 651-296-0680.
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