In a recent decision, the Louisiana First Circuit Court of Appeal held that nursing homes and adult residential care providers are not required to pay sales tax on their purchases of food ingredients used to prepare meals for residents. Camelot of North Oaks, LLC et al. v. Tangipahoa Parish School System, Sales and Use Tax Division, 2024 CA 0840 (May 22, 2025). 

The Facts: Camelot of North Oaks, Kentwood Manor Nursing Home, and Summerfield of Hammond (collectively, the “Taxpayers”) are licensed Louisiana nursing homes and adult residential care facilities required by regulation to provide a “nourishing, palatable, well-balanced diet” to their residents. The Taxpayers contract with their residents to provide services to their residents, including three meals a day, for a lump-sum monthly fee. During the tax periods at issue, the Taxpayers purchased food ingredients, paid taxes on those purchases, and later sought refunds, claiming that the purchases were exempt from sales tax. The Taxpayers cited a statute which exempts sales of meals to residents of nursing homes and residential care providers from sales tax, La. R.S. 47:305(D)(2). The Tangipahoa Parish School System, Sales and Use Tax Division (the “Collector”) denied the refund claims, arguing that the food purchased by the Taxpayers were not “sold” to the residents, and therefore, the initial purchase could not qualify as a nontaxable sale for resale. 

The Louisiana Board of Tax Appeals disagreed with the Collector, finding that the provision of meals to residents did constitute a sale and that the initial ingredient purchases were therefore nontaxable sales for resale.

The Decision: The Court began its analysis with La. R.S. 47:305(D)(2), which exempts “[s]ales of meals furnished . . . [t]o the . . . residents of nursing homes [and] adult residential care providers . . . .” The Court recognized that the Taxpayers’ sales of meals to residents would fall within the exemption, but the key issue was whether the Taxpayers “sold” the meals to their residents. The Court looked to the statutory definition of “retail sale,” which is “a sale to a consumer . . . for any purpose other than for resale in the form of tangible personal property . . . .” (Emphasis added). The Court concluded that the Taxpayers’ provision of meals to residents for consideration (as part of the monthly fee) constituted a sale and that the initial purchase of ingredients was therefore a nontaxable sale for resale. The fact that the meals were provided for a bundled fee, rather than being separately itemized, did not alter the character of the transaction as a sale.

The Concurrence: Chief Judge McClendon, in her concurrence, took a more streamlined approach, focusing on the two distinct transactions: (1) the purchase of ingredients by the Taxpayers, and (2) the provision of prepared meals to residents. The concurrence explained that the first transaction is a nontaxable sale for resale if the second transaction is a sale—regardless of whether the second transaction is itself exempt from tax. Because the residents paid consideration for the meals (as part of their monthly fee), the second transaction was a sale, making the initial purchase of ingredients a nontaxable sale for resale. The concurrence also noted that, while residents would normally bear the burden of sales tax as the ultimate consumers, the sale to residents was exempt under La. R.S. 47:305(D)(2). This interpretation of the statutes, the concurrence observed, furthers the public policy of minimizing the cost of meals to nursing home and adult care residents (presumably, if the Taxpayers’ purchase of the ingredients were taxable, the additional cost would be passed through to the residents). 

The Takeaway: The main opinion’s focus on the exemption in La. R.S. 47:305(D)(2) is a red herring. The critical issue is not whether the sale by the Taxpayers to their residents was exempt, but whether it was a “sale” at all. The exemption is relevant to the taxability of the end transaction, but the initial purchase of ingredients is nontaxable as a sale for resale so long as the subsequent transaction is a sale—regardless of whether that sale is taxable or exempt. It is important to focus on each transaction in a series of transactions and to determine whether each is subject to tax. Under Louisiana law, a transaction may not be subject to tax, where, as in this case, it is “for resale,” or the transaction may not be subject to tax based on a specific statutory exemption, such as La. R.S. 47:305(D)(2).