Louisiana Sales Tax Exemption for Food Purchases
The industry leading sales tax experts at Agile Consulting Group have just secured a ruling from the Louisiana Board of Tax Appeals that requires the Parishes to honor the Louisiana Sales Tax Exemption for Food Purchases made by hospitals, nursing homes, adult residential care providers and other continuing care retirement communities. This exemption, which is codified in Louisiana Revised Statutes 47:305(D)(2), has been available for these specific types of facilities since June 13, 2013. Prior to this effective date, the exemption was only applicable to hospitals, but the passage of Act 271 during the 2013 legislative session expanded the exemption to include other types of residential facilities, including nursing homes, adult residential care providers, and continuing care retirement communities.
Louisiana Parishes Had Been Denying the Exemption
Parishes in Louisiana are separate taxing authorities from the state and administer their taxes independent of the Louisiana Department of Revenue. This means that, in certain situations, they can create their own sales tax laws (ordinances) and take different positions regarding the applicability of exemptions created by the Louisiana legislature. The Louisiana Sales Tax Exemption for Food Purchases is a situation where the Parishes wanted to take a narrow approach on how this exemption applies to qualifying facilities.
The exemption in Louisiana Revised Statutes 47:305(D)(2) states that “Sales of meals furnished…to the staff and patients of hospitals and to the staff and residents of nursing homes, adult residential care providers, and continuing care retirement communities” are exempt from both state and local sales tax. Since the exemption is written to exempt the “sales of meals” and these types of facilities don’t itemize meals on monthly bills (meals are included as part of a fixed monthly cost that patients pay), the Parishes argued that the facilities aren’t actually “selling” a meal. They claimed that the Louisiana Sales Tax Exemption for Food Purchases does not apply to them because the facility doesn’t directly charge patients and staff for the meals.
This is contrary to the Department of Revenue’s position, which states that this exemption is applicable to the purchases of food that are used in the preparation of meals furnished to staff and patients of these facilities. The Department’s logic is that the food purchases are a “sale for resale” because the facility is purchasing the food with the intention of furnishing it in the form of a meal to their staff and patients where they receive monetary consideration for the provision of that meal.
Louisiana Board of Tax Appeals Decision on Food Purchases
Since Agile Consulting Group believed that the Louisiana Sales Tax Exemption for Food Purchases should be applicable to qualifying facilities in the Parishes, in coordination with several of our clients and our attorney, we submitted petitions to the Louisiana Board of Tax Appeals (“BTA”) that protested the denials of refund claims for our clients’ food purchases.
On March 14, 2024, Judge Cole of the BTA issued his decision in Anderson Memory Care, LLC v. Smith, BTA Docket No. L01161 and Camelot of North Oaks, LLC v. Tangipahoa Parish, BTA Docket No. L01474.
In his decision, Judge Cole ruled that the “sales of meals” exemption in Louisiana Revised Statutes 47:305(D)(2) extends to the purchases of food items by qualifying facilities and that these food purchases can be purchased tax-exempt as a “sale for resale”. Essentially, the ruling concurs with the Department of Revenue’s, where a “sale can occur without a set price so long as the transaction is supported by some type of consideration.” Since the meal costs are included in the monthly fee that these facilities charge their patients, the facilities receive monetary compensation for meals and this qualifies as a “sale”.
Next Steps to Recover Parish Sales Taxes on Food Purchases
The Parishes have until May 14, 2024, which is 60-days from the BTA decision, to appeal. If they don’t appeal and choose to accept the decision, then all Parish sales taxes paid by hospitals, nursing homes, adult residential care providers, and continuing care retirement communities to their food vendors will be exempt.
Some of the most common food vendors in the Louisiana Parishes are Ben E. Keith, Performance Food Group (formerly known as Reinhart), Sysco, and US Foods. From Agile’s experience working closely on this issue since 2020, we know that these vendors were advised by the Parishes to continue charging Parish sales tax to their Louisiana customers. Now that the Board of Tax Appeals has issued their decision, qualifying facilities can take advantage of the Louisiana Sales Tax Exemption for Food Purchases by issuing resale certificates to their food vendors. As the pioneers on this issue who fought on behalf of the Louisiana healthcare industry, the consultants at Agile Consulting Group are the ideal partner to help you claim the exemption going forward.
Reach Out to Us with Questions
With Judge Cole's recent ruling confirming the applicability of this exemption to food purchases by qualifying facilities, stakeholders now have the opportunity to recover Parish sales taxes and streamline their financial operations.
If you have any questions, comments or would like to discuss the specific circumstances you are encountering in regard to this issue or need assistance with a sales tax refund review or any other sales and use tax issue, please contact a member of Agile Consulting Group’s sales tax consulting team at (888) 350-4TAX (4829) or via email at info@salesandusetax.com.
