Subject: Complimentary Meals or Snacks
Tax: Sales & Use Tax
Law: G. S. 105-164.3(15), G.S. 105-164.4 and G.S. 105-164.6
Issued By: Sales and Use Tax Division
Date: September 1, 1998
This Directive replaces Sales and Use Tax Bulletin No. 27 issued July 20, 1989.
Sales and Use Tax Technical Bulletins 19-10 and 27-3 have also been revised.
This Directive clarifies the application of sales and use tax to food that
is purchased by a hotel, motel, bed and breakfast inn, or similar business and
is used to provide a complimentary meal or snack to a guest. A meal or snack
is "complimentary" when the business does not make a separate charge for the
meal or snack. The application of sales and use tax depends on whether the business
operates a restaurant or other eating place where prepared food and drink is
sold for immediate or on-premises consumption.
If a business does not operate a restaurant or similar place in which it sells
prepared food, the food is subject to the applicable State tax and local tax
when it is purchased. This is because the food is used by the business rather
than resold. The food is an operating expense similar to other expenses subject
to sales or use tax such as linens, toiletries, and cleaning supplies.
If a business operates a restaurant or similar place that sells prepared food,
G.S. 105-164.3(15) states that the food used in providing the complimentary
meal or snack is considered sold along with the prepared meals and is not subject
to sales or use tax. The business should purchase all food for resale without
paying tax on the food by completing a Certificate of Resale, Form E-590. The
business is liable for collecting and remitting the 4% State tax and 2% local
tax on the retail sales price of the prepared meals or snacks when sold.
If you have questions about this Directive, you may call the Office Services
Division, Taxpayer Assistance Section of the North Carolina Department of Revenue
at (919)733-3661. You may also write to the Division at P.O. Box 25000, Raleigh,
Last modified on:
10/31/07 03:37:41 PM.