Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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550.0000 TAXABLE SALES OF FOOD PRODUCTS—Regulation 1603

Annotation 550.1465


550.1465 Subsidies to Meal Vendors. A taxpayer is engaged in preparing and serving meals in cafeterias and executive dining rooms pursuant to written agreements with clients. The clients own, furnish, and maintain the cafeteria and dining room premises and equipment. The agreements provide for a management or service fee and for a subsidy to guarantee an adequate return to the taxpayer. All meals are billed periodically to the clients. No charges are made to the individual diners either by the taxpayer or the clients.

The taxpayer is regarded as making taxable sales of meals to its clients and the amount subject to tax includes the subsidies. In contrast to Szabo Food Service, Inc. v. State Board of Equalization (1975) 46 Cal.App.3d 268, the diners here did not individually purchase meals. 6/23/94.