In City of Golden v. Sodexo America, LLC, the Colorado Supreme Court addressed a sales tax dispute involving Sodexo, the food service provider for the Colorado School of Mines. The City of Golden audited Sodexo and assessed $234,481 in unpaid sales tax for meal-plan transactions between 2011 and 2013. Golden claimed Sodexo sold meals directly to students at retail, subjecting the transactions to sales tax under the city’s municipal code. Sodexo contended that its transactions were tax-exempt wholesale sales to Mines.
Trial and Appeals
The trial court ruled in favor of Golden, determining that Sodexo engaged in taxable retail sales directly with students. On appeal, the Colorado Court of Appeals reversed, finding that Sodexo sold meals to Mines at wholesale and that Mines resold them to students. Golden then appealed to the Colorado Supreme Court.
Supreme Court Ruling
The Colorado Supreme Court affirmed the Court of Appeals’ decision, ruling in favor of Sodexo. Key points included:
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Two Separate Transactions: The court identified two distinct sales—Sodexo sold meal-plan meals to Mines at wholesale, and Mines sold the meals to students as part of residence hall contracts.
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Wholesale Sales Definition: Under Golden’s municipal code, a wholesale sale occurs when goods or services are sold to a retailer for resale. The court found that Mines acted as a retailer by purchasing meals from Sodexo and reselling them to students.
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Tax Exemption: Since Sodexo’s transactions with Mines were wholesale, they were exempt from sales tax. The court noted that the student meal swipes functioned only as an accounting mechanism and not as direct consideration to Sodexo.
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Clarification of Prior Case Law: The court overruled conflicting precedent in Aramark, which had reached the opposite conclusion regarding similar transactions.
Conclusion
The ruling underscores the importance of distinguishing between wholesale and retail sales under municipal tax codes. It also highlights the role of contractual arrangements in determining tax liability, providing clarity for businesses operating under similar agreements.
Joe Whitcomb
