How to calculate tax due on meals provided by senior living communities for July 2023 & Q3/2023

Effective July 23,2023, the value of food, drinks, meals furnished to tenants of senior living communities as part of their rental agreement are not subject sales or use tax when charges for such food, drinks, meals are not separately stated. However, the value of such meals is subject to business and occupation (B&O) tax under the Service and Other Activities classification.

Note: The calculations below are only for senior living communities that provide food, drinks, meals to their residents and do not separately state the charges for these items. Senior living communities that separately charge for food, drinks, or meals must continue to collect sales tax on the amount separately charged.

Senior living communities may use the formulas below to calculate tax due on meals furnished by them to tenants as part of a rental or residency agreement when no separate charge is made for the month of July 2023.

From July 1 – July 22, 2023, the value of the meals is subject to B&O tax under the Retailing classification, and retail sales tax must be collected on such amounts. Effective July 23, 2023, the value of the meals is subject to B&O tax under the Service and Other Activities classification, and such amounts are not subject to retail sales tax or retailing B&O tax.

Monthly reporters (July 2023)

Option 1.
Daily amount for meals

If you determine your meal values on a daily basis, then you can calculate the tax due on a daily basis.

Example: Each day’s meals are valued at $10 per day. July 1 – July 22 is 22 days, therefore, the total for meals for these days would be $220 and the total for the meals for July 23 – July 31 would be $90 (9 days at $10) per day.

You would report the following for July:

$220 under the Retailing B&O tax classification.
$220 under the Retail Sales Tax (both State and Local sales tax)
$90 under the Service and Other Activities B&O tax classification.

Option 2.
Monthly flat rate for meals

However, if you determine your meal values on a flat monthly fee basis, you will need to determine the daily basis for the meals first and then calculate the tax due.

Example: You have determined that the value of the meals you provide for the month is $1,000. There are 31 days in July so that is $32.26 per day ($1,000/31).

Therefore, for July 1 – July 22, the amount for the meals is $709.72 ($32.26 X 22 days). Additionally, the amount for the meals for July 23 – July 31 is $290.34 ($32.26 X 9 days).

You would report the following for July:

$709.72 under the Retailing B&O tax classification.
$709.72 under the Retail Sales Tax (both State and Local sales tax).
$290.34 under the Service and Other Activities B&O tax classification.

Quarterly reporters (Q3/2023)

Option 1.
Daily amount for meals

If you determine your meal values on a daily basis, then you can calculate the tax due on a daily basis.

Example: Each day’s meals are valued at $10 per day. July 1 – July 22 is 22 days, therefore, the total for meals for these days would be $220 and the total for the meals for July 23 – September 30 would be $700 (70 days at $10) per day.

You would report the following for Q3/2023:

$220 under the Retailing B&O tax classification.
$220 under the Retail Sales Tax (both State and Local sales tax).
$700 under the Service and Other Activities B&O tax classification.

Option 2.
Monthly flat rate for meals

However, if you determine your meal values on a flat monthly fee basis, you will need to determine the daily basis for the meals first and then calculate the tax due.

Example: You have determined that the value of the meals you provide for the month is $1,000. There are 31 days in July, 31 days in August and 30 days in September, so that is $32.61 per day ($3,000/92).

Thus, for July 1 – July 22, the amount for the meals is $717.42 ($32.61 X 22 days). Additionally, the amount for the meals for July 23 – September 30th is $2,282.70 ($32.61 X 70 days).

You would report the following for Q3/2023: