United States

Missouri: Frozen Meals sold to Commercial Airlines not eligible for Reduced Sales Tax Rate for “Food”

Nov 09, 2015
From KPMG TaxWatch

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Recently, the Missouri Administrative Hearing Commission ruled that sales of frozen meals to commercial airlines did not qualify for the reduced sales tax rate imposed on certain sales of food. Under Missouri law, sales and use tax is generally imposed at a rate of four percent on sales of tangible personal property. A lower one-percent rate applies to sales of “food.” The term “food” is defined to include only the types of food for which food stamps may be redeemed pursuant to the federal Supplemental Nutrition Assistance Program (formerly Food Stamp program). Under the program, “food,” is defined in relevant part, as “any food or food product for home consumption.” The taxpayer at issue sold frozen meals to commercial airlines. The meals were heated and then eaten by the airlines’ passengers, pilots, and crew while on board the aircraft. The Director of Revenue audited the taxpayer and determined that these sales did not qualify for the reduced rate. The taxpayer paid the resulting additional assessment under protest and appealed the Director’s determination to the Commission.

The Commission upheld the Director’s determination. The taxpayer argued that the lower rate should apply because its frozen meals were the same as frozen meals that could be bought “for home consumption” under the federal nutrition assistance program. In the taxpayer’s view, the location where the food was to be consumed was not legally relevant. The Commission disagreed, noting that an earlier Missouri Supreme Court decision governed the case at hand. In the earlier decision, a movie theater argued that the reduced rate should apply to its sales of food concessions such as popcorn, candy, soda, and hotdogs. The Missouri Supreme Court held that the relevant inquiry is not whether the food “is the type of food for which food stamps could be redeemed,” but whether the food was “for home consumption.” The Commission noted that there is no doubt that taxpayer’s frozen meals were intended for consumption in a commercial aircraft, not at home. The taxpayer tried to distinguish its case from the Missouri Supreme Court case by arguing that popcorn, candy, and hotdogs are generally purchased for immediate consumption while frozen meals are generally purchased for home consumption. The Commission again rejected this argument, noting that under Missouri Supreme Court precedent, what matters is whether the food was actually sold “for home consumption” not whether it is generally the type of food item purchased for home consumption. For more information regarding Gate Gourmet v. Director of Revenue, please contact John H. Griesedieck at 312-665-3024.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.