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Sales Tax Exemption of Prepaid Meal Plans at FL Educational Institutions, Beginning July 1

 

On June 27, 2014, the Florida Department of Revenue (the “DOR”), in TIP #14A01-09, explained the exemption from sales tax, beginning July 1, 2014, on the sale of certain prepaid meal plans at colleges andinstitutions of higher learning in Florida.

A. Qualification for Exemption:

In order to qualify for the exemption, all of the following requirements must be met:

1) Meal plan must be:

    • prepaid (a payment, whether in full or in installments, must be initiated in advance of use);
    • purchased from the educational institution (purchases made on student accounts or payment made directly to the educational institution will qualify);
    • purchased by a student (taking any number of credit hours) currently enrolled at the educational student; AND
    • for a defined quality of units (ex., number of meals per week, month, year, or term; a set monetary amount; or an unlimited number of meals for a defined number of days).

2) The balance of unused units must expire at the end of any academic term (can expire during an academic term other than the one in which the units were purchased).

    • Note that units can rollover from term to term, provided that they will eventually expire at the end of an academic term.

3)  The units cannot be refunded to the student at expiration

    • Refunds due to withdrawal from the educational institution, changing from a school meal plan to a meal plan provided by a sorority or fraternity, or other changes in circumstances do not disqualify a meal plan from the exemption.
    • Refunds at graduation are considered the refund of units at expiration and thus would disqualify a meal plan from the exemption.

4) The units can only be exchanged for food.

B. Application to “Hybrid” Meal Plans/Flex Dollars:

The DOR notes that many college plans have “hybrid” options that provide for a prepaid meal plan and provide a set amount of “flex” dollars that can be used for certain types of purchases.  For these types of plans, the portion of the plan that meets the requirement of a prepaid meal plan as described above can be exempt if the “flex” dollars are cash equivalents where the taxability is not determined until use.  If the “flex” dollars meet the requirements of a prepaid meal plan as provided above in A. Qualification for Exemption, the entire meal plan can be exempt.

See “Florida DOR Explains Exemption of Prepaid College Meal Plans,” 2014 STT 130-16, July 8, 2014.

 

Want to further discuss these issues?  Contact me at 954-944-3929 or nrumbak@rumbaklaw.com.

*This document contains legal information, but does not contain legal advice.

 

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