Do Employer Sponsored Cafeterias Have to Collect Sales Tax?

Missouri Supreme Court Says Operator of Federal Reserve Cafeteria Must Collect Sales Tax

Most states apply some form of sales tax to the purchases of meals and drinks. But what if a business or public employer maintains an employee cafeteria? Does the cafeteria operator need to charge sales tax on the meals and drinks sold to the employees?

The Missouri Supreme Court recently confronted these questions in a case, Myron Green Corporation v. Director of Revenue, that also involved the interaction of federal and state law. The plaintiff in this case, Myron Green Corporation, is a private company that provides food services to clients in Kansas City and several other Midwestern cities. One of Myron Green’s customers was the Federal Reserve Bank of Kansas City.

FRB of Kansas City contracted for employee cafeteria.

cafeteriaThe Bank contracted Myron Green to run its in-house cafeteria which is restricted to Bank employees due to security needs. But, if cleared to enter the Bank, visitors could also purchase food and drink at the cafeteria.

Under Myron Green’s contract, Bank employees could pay for their purchases using their identification badges. The Bank would then deduct the purchase amounts from the employee’s next paycheck. Employees and visitors could also pay for purchases in cash, although roughly 80 percent of all sales were paid for using payroll deduction.

Actually, the bank paid Myron Green a lump-sum every two weeks using its own credit card. The Bank then reimbursed itself from the amounts deducted from individual employees. The Bank further subsidized the overall cost of food such that the employees and other customers paid below-market prices at the cafeteria.

Under federal law, Federal Reserve banks are exempt from paying all state and local taxes (aside from property taxes). Myron Green believed this federal exemption meant it did not have to collect Missouri sales tax on any products sold in its cafeteria at the Kansas City bank.

Sales are to employees, not the bank itself, thus taxable.

The Missouri Department of Revenue determined that all the cafeteria’s cash and payroll-deduction sales were made to individual employees, not the bank itself, and the exemption only applied to the latter. After an administrative hearing commissioner upheld the Department’s determination, Myron Green sought judicial review directly with the Missouri Supreme Court.

Missouri Supreme Court Upholds Determination

In a unanimous decision published on January 15, 2019, the Court agreed with the Department of Revenue and the commissioner’s reading of the law.

First, the Court noted that Missouri law imposes a sales tax any place where “meals or drinks are regularly served to the public.” The Court said there was a difference between a company-owned cafeteria and one maintained by an outside contractor like Myron Green. In a 2003 decision, the Supreme Court said a Missouri company that operated its own employee cafeteria did not need to collect sales tax because the firm’s “main business was not operating company cafeterias.” In contrast, Myron Green’s main business was “operating on-site cafeterias for corporate clients.” And the fact that access to the Federal Reserve building itself was restricted did not matter, as Myron Green’s cafeteria sold food or drink to anyone who had cash, i.e. it “regularly served” the public.

Second, the Court also rejected Myron Green’s argument that the Federal Reserve’s institutional sales tax exemption extended to individual employees. The Bank did not purchase food or drink directly from Myron Green. Rather, Myron Green purchased its own food at wholesale and offered it for resale to individual employees. Even though most Bank employees paid for purchases using their employee IDs, this “merely provided an avenue through which bank employees could pay.”

 

Tax Changes For October 2016

rates-changed

rates-changed

Sales and/or use tax rates have changed in 12 states in Zip2Tax products since September 2016.

In Alaska, tax rates changed for Sitka, Skagway, Seldovia and Whittier.
In Arkansas, tax rates changed for Bald Knob, Hartford, Wilson and Yell County.
In California, tax rates changed for Compton, Corning, Isleton, Marysville and San Jose.
In Georgia, tax rates changed for the counties of Hancock, Pulaski and Towns.
In Kansas, tax rates changed for Arkansas City and Salina.
In Missouri, tax rates changed for Audrain County, Cedar County, Crawford County, Bourbon, Jasper County, Knox County, Macon County, Ripley County, Cameron, Bernie, Country Club Hills, Ferguson, Fulton, Goodman, Louisiana, Malden, Marceline, Maryville, Oak Grove, Osborn, Paris, Richmond, Seymour, Steele, Trenton, Verona, Winona, Clark County, Union, and Stoddard County.
In North Carolina, tax rates changed for Cherokee County and Jackson County.
In Ohio, tax rates changed for Clinton County.
In Oklahoma, tax rates changed for Holdenville, Medicine Park, Webbers Falls, Sayre, Mooreland, Shattuck, West Siloam Springs, Blackwell, Kay County, Kansas, and Colcord.
In Texas, tax rates changed for Brownwood, Early, Buffalo Gap, Crystal City, Skellytown, Burton, Cranfills Gap, Double Oak, Follett, Hallsville, Jacinto City, Pattison, Three Rivers, Vega, Waskom, Danbury, Elmendorf, Krum, Millsap, Moulton, and Hardin.
In Vermont, tax rates changed for Brandon.
In Washington, tax rates changed for Ellensburg, Mattawa and Othello.

ZIP code changes too….

There were 13 states with ZIP code changes effective after September 2016 including D.C., Florida, Georgia, Idaho, Indiana, Kansas, Massachusetts, Michigan, Nebraska, New Mexico, Oregon, Pennsylvania, and Texas.
 Until next month…..
bd-french

B.D. French, Z2T Researcher

 

 

Sales tax change frequency by state

Zip2Tax compares the sales tax change frequency of the states. Ever wonder how your state measures up?

It’s generally accepted that there are around 11,000 sales tax jurisdictions across this great and diverse country of ours. This fact alone would seem to be a fairly reasonable argument for the outsourcing of sales and use tax rates from a company such as Zip2Tax. As the head of marketing for Zip2Tax I am always trying to understand our customer’s needs better. I found myself wondering about the sales tax change frequency for all these jurisdictions. I mean, 11,000 rows in a document might be manageable if they only changed their rates every few years or so, right?

So I sat down and with my trusty Excel spread sheet and a large cup of strong coffee and started going back through our research documentation counting the number of months that there had been any sales tax changes in each state. I wanted to determine which states had the highest sales tax change frequency. I sampled a three-year period from December 2015 going back through January 2013.

… fully one-third of the time that these states CAN make sales or use tax rate changes, they DO.

When the numbers were crunched I had some surprises in store, to be sure. For one, the states that provide Zip2Tax with the most new customers have no obvious correlation with which states had the highest sales tax change frequency. In fact, California and New York were only slightly above average.

The standout in this sample was Alabama which turned out to be far and away the leader with changes in 30 out of the 36 months – that’s 83% of the time. This also helped to dash my hopes of discovering a hotbed of customer need for our product since Alabama has so far not proven to be a great source of new business.
sales tax change frequency

Arizona came in second with 14 changes over that same period. Georgia, Louisiana, Oklahoma and Texas all tie for third place with 13 sales tax rate changes over 36 months. That translates to mean that fully one-third of the time that these states CAN make sales or use tax rate changes, they DO. Not to overstate the obvious, but that is more frequently than quarterly updates.

… more than two-thirds, updated that tax a minimum of once a year, and by the end of 3 years, 86% of the states had made changes…

In fact, 68% of the states that collect a sales tax, that’s more than two-thirds, updated that tax a minimum of once a year, and by the end of 3 years, 86% of the states had made changes.

So as I drained the last of my cold coffee I felt some gratification in that even though sales tax will remain an extremely complex moving target in nearly all 50 states, at least it should mean a steady supply of customers for sales tax rate providers like Zip2Tax for the foreseeable future.

Fill in the sign up form below this blog to receive our monthly newsletter and get alerted when one of these states makes a sales or use tax change or other important tax-related information.

 

New Year’s sales tax updates effective January 1, 2016

Sales tax updates: 19 states have sales and use tax rates which have changed in Zip2Tax products since December 2015. 

There are sales tax updates in Alabama, Arkansas, Arizona, Colorado, Florida, Georgia, Illinois, Kansas, Louisiana, Minnesota, Missouri, North Dakota, New Mexico, Nevada, Ohio, Oklahoma, South Dakota, Texas and Utah effective Jan. 1st.

In Alabama, tax rates changed for Rockford, Luverne and Waterloo.

In Arkansas, tax rates changed for Bald Knob, Brinkley, Gillham, Harrisburg, Viola and Crittenden County.

In Arizona, tax rates changed for Apache Junction, Phoenix and Prescott Valley.

In Colorado, tax rates changed for Bayfield, Bennett, Fraser, Lyons, Ouray, the Counties of Alamosa and Chaffee, Gunnison Valley RTA, Montezuma County Hospital District, Colorado Springs, Crested Butte and Greeley.

In Florida, tax rates changed for the Counties of Jackson, Walton, Hernando and Saint Johns.

In Georgia, tax rates changed for Hancock County.

In Illinois, tax rates changed for Morton Grove, Posen, Stickney, Bellwood, Bloomington, Herrin, Hopkins Park, Matteson, Shorewood and Cook County.

In Kansas, tax rates changed for Shawnee.

In Louisiana, tax rates changed for Folsom, Lake Charles and Merryville.

In Minnesota, tax rates changed for Rochester and the Counties of Otter Tail and Freeborn.

In Missouri, tax rates changed for Carthage, New Madrid County, Chillicothe, Holt County, Saline County and Aurora.

In North Dakota, tax rates changed for Alexander and Center.

In New Mexico, tax rates changed for Maxwell, Springer, De Baca County, Eddy County, Vaughn, Lincoln County, Mora County, Otero County, Jemez Springs, Farmington and Kirtland.

In Nevada, tax rates changed for Clark County.

In Ohio, tax rates changed for Portage County.

In Oklahoma, tax rates changed for Bartlesville, Gore, Hollis, Norman, Del City, Marshall County and Pittsburg County.

In South Dakota, tax rates changed for Astoria.

In Texas, tax rates changed for Corral City and Goliad.

In Utah, tax rates changed for Dutch John.

There were 13 states with ZIP code changes effective after December 2015 including California, Connecticut, Florida, Iowa, Indiana, Massachusetts, Michigan, Missouri, Montana, New Jersey, Oklahoma, Texas and West Virginia. A PDF document enumerating ZIP code additions and deletions can be made available upon request.

For December 2015 changes click here.  To see what States are the most guilty of constantly changing their tax rates visit this article.

Angel Downs, Zip2Tax's ead tax researcher

Angel Downs, Zip2Tax’s lead tax researcher

Sales and use tax changes for October 2015

Sales and use tax changes for October 2015

Sales and use tax rates have changed in 16 states in Zip2Tax products since September 2015.

In Alaska, tax rates changed for Sitka, Skagway, Seldovia and Whittier.

In Alabama, tax rates changed for Tallapoosa County, Grove Hill, Fayette, Evergreen and Dodge City.

In Arkansas, tax rates changed for Brinkley, El Dorado, and Western Grove.

In California, tax rates changed for Greenbrae and Monterey.

In Kansas, tax rates changed for Andover, Belleville, Buhler, Cherryvale, Eudora, Haven, LaCrosse, Lecompton, Meriden and Bourbon County.

In Louisiana, tax rates changed for Folsom.

In Minnesota, tax rates changed for Lyon and Scott Counties.

In Missouri, tax rates changed for Dent County, Salem, Henry County, Laclede County, New Madrid County, Sedalia, Bertrand, Bethany, Concordia, Country Club Hills, Crystal City, Fair Play, Galena, Hazelwood, Kirkwood, Miner, Rolla, St. John, Stanberry and Tipton.

In North Dakota, tax rates changed for Mandan.

In Nebraska, tax rates changed for Lincoln and Chadron.

In Ohio, tax rates changed for Lake County.

In Texas, tax rates changed for Stowell, Winnie, Rocksprings, Ropesville, Stratford, Gustine, Combes, Deer Park, Granger, Lake Dallas, Panhandle, Santa Rosa, Sonora, Southlake, White Deer and Yorktown.

In Utah, tax rates changed for Murray and Logan.

In Vermont, tax rates changed for Colchester.

In Washington, tax rates changed for Tumwater TBD.

In Wyoming, tax rates changed for Weston County.

There were 25 states with ZIP code changes effective after September 2015 including Alaska, Arizona, Colorado, DC, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Maryland, Missouri, North Dakota, Nebraska, New Jersey, Nevada, Ohio, Pennsylvania, South Dakota, Tennessee, Texas, Virginia and West Virginia.A PDF document enumerating ZIP code additions and deletions can be made available upon request.

For September’s changes click here.

Angel Downs, Zip2Tax's ead tax researcher

Angel Downs, Zip2Tax’s lead tax researcher

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