Ruling 2002-4, Sales and Use Taxes / Business Management Services
FACTS:
The service provider (the “Company”) is entering into a contract to provide meals in an assisted living facility for elderly persons. The Company will supply food, dietary supplies, linens, uniforms, labor, and management services and will cover associated personnel fringe benefit costs to prepare three meals a day at the assisted living facility. The assisted living facility is not a nonprofit hospital, nursing home, rest home or residential care home. The assisted living facility is a for-profit entity.
ISSUES:
Will the Company render taxable business management services under Conn. Gen. Stat. §12-407(2)(i)(J) to the assisted living facility when it manages the food service operation at the assisted living facility?
Does the exemption under Conn. Gen. Stat. §12-412(35) for sales of services and tangible personal property to a center of service for elderly persons apply to the sales of meals and services under the contract with the assisted living facility?
Does the contract between the Company and the assisted living facility qualify for exemption under Conn. Gen. Stat. §12-412(9) as sales of food products, meals, candy, confectionery and beverages to patients, residents, or care recipients of an assisted living facility?
RULING:
The services rendered by the Company to the assisted living facility in connection with preparing meals for the residents of such facility are subject to tax under Conn. Gen. Stat. §12-407(2)(i)(J) as business management services.
Sales by the Company to the assisted living facility are not exempt under Conn. Gen. Stat. §12-412 (35) as sales of services or tangible personal property to a center of service for elderly persons.
Any charges for sales of food products, meals, candy, confectionery and beverages directly to patients, residents and care recipients of the assisted living facility are exempt from tax under Conn. Gen. Stat. §12-412 (9).
DISCUSSION:
Business management services are subject to sales and use taxes under Conn. Gen. Stat. §12-407(2)(i)(J). Conn. Agencies Regs. §12-407(2)(i)(J)-1 describes business management services and provides that such services are taxable when they relate to the core business activities of a business.
Conn. Agencies Regs. §12-407(2)(i)(J)-1(e) defines the term “business management services” to mean and include
the provision of general or specialized day-to-day management of a service recipient’s personnel with respect to, or the controlling or directing of, all or a portion of the core business activities . . . of a service recipient . . . .
Conn. Agencies Regs. §12-407(2)(i)(J)-1(h) defines the term “core business activities” to mean and include
activities directly related to a service recipient’s lines of business involving sales of products, property, goods or services to others, its capital structure, its budgeting and its short-range, long-range or strategic planning.
Ruling No. 93-5 concerns the taxability of nutrition-related management services provided to a nursing home. Ruling No. 93-5 states the following:
The Home’s core business is caring for its residents. Providing nutritionally balanced meals to its residents is an activity that is directly related to the Home’s line of business. . . . Thus, the Company’s charges for providing nutrition-related management services to the Home are subject to sales and use taxes to the extent the charges relate to meals served to the Home’s residents.
As is the case for meal management services in a nursing home, preparing and serving meals to the residents of an assisted living facility directly relates to the core business activities of such facility, and so managing the food service operation of an assisted living facility is a business management service.
Conn. Gen. Stat. §12-412(35) provides an exemption for sales of tangible personal property and services to any center of service for elderly persons. However, a review of the definitions of “senior center” and “assisted living facility” shows that they are two different establishments.
An assisted living facility is a residential community that provides services such as those described as assisted living services in Conn. Agencies Regs. §19-13-D105(2), Assisted living services agency. Assisted living facilities provide nursing services and supportive services to their residents with activities of daily living such as meals, laundry, transportation, housekeeping and recreation. In contrast, as described in Conn. Gen. Stat. §17b-425, a senior center provides recreational, cultural, and other leisure time activities, and informational, transportation, referral and preretirement and postretirement counseling services for elderly persons. Although both assisted living facilities and senior centers provide services for elderly persons, senior centers do not provide housing for older persons, nursing services and assistance with daily living activities such as housekeeping and laundry.
Since an assisted living facility is not a “center of service for elderly persons as described in subdivision (d) of section 17b-425,” the business management contract to manage the food service operation at the assisted living facility is not exempt from tax under Conn. Gen. Stat. §12-412(35).
Conn. Gen. Stat. §12-412(9), as amended by 2000 Conn. Pub. Acts 174, §9, provides an exemption for sales of food products, meals, candy, confectionery and beverages sold to patients, residents or care recipients of an assisted living facility. Therefore, any charges made by the company for its direct sales to residents of an assisted living facility for the sales of food products, meals, candy, confectionery and beverages are exempt from tax.
LEGAL DIVISION
July 29, 2002