St. Louis Record

Monday, October 14, 2019

High court affirms cafeteria operator at federal reserve bank is not exempt from sales tax


By Sam Knef | Jan 28, 2019

JEFFERSON CITY – The Missouri Supreme Court recently affirmed a hearing commission ruling that determined the operator of a cafeteria at the Federal Reserve Bank of Kansas City cannot claim the bank's sales tax exemption. 

The Supreme Court issued its Jan 15 opinion after Myron Green Corp. had appealed the decision of a Department of Revenue hearing commission that found it was liable for sales tax on food sold to employees of the bank at an on-site cafeteria.

The court affirmed the commission because Myron Green regularly sold food to the "public" as the term is used in the state's revenue code, and the bank's tax exemption does not extend to individual employees, even though the bank is a secure facility where public access is limited.

The ruling said the arrangement Myron Green has with the Federal Reserve is "cost plus," where the bank pays actual costs and expenses plus an added fee to compensate Myron Green for its services.

Myron Green handles nearly all of the services – buying food, employing workers, cooking food and operating point of sale, which is either cash or payroll deduction, no credit or debit cards. The bank's involvement is limited to setting prices for food sold, hours of operation and screening employees who work at the cafeteria, the ruling said.

Most of the transactions, 80 percent, are paid through payroll deduction and the remaining cash payments are deposited into a Myron Green bank account, the ruling said. The cafeteria operator did not charge or collect sales tax on any items it sold. But after an audit, the Revenue Department determined both cash sales and payroll deductions sales were taxable because individual customers made the purchases, not the bank, whose purchases are exempt from Missouri sales and use tax.

On appeal, Myron Green argued that the bank exercised "dominion and control" over the food because the bank stores the food, influences pricing and sets the cafeteria’s hours.

"The commission correctly rejected this view, however, because the bank’s overall transaction structure and payment schedule with Myron Green is not compatible with the bank exercising dominion over the food," the opinion said.

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