Publication 45, Hospitals and Other Medical Facilities
Food Service Transactions

The following information explains how tax applies to your hospital food service operations. For additional information on this subject, we recommend that you see publication 22, Dining and Beverage Industry, or Regulation 1603, Taxable sales of food products.

Application of Tax to Food and Beverage Sales—In General

In general, sales of food and beverages are subject to tax when tables, chairs, or counters are provided or food is sold on trays, glasses, dishes, or other nondisposable tableware provided by the hospital or other medical facility (such as food sold in a cafeteria, restaurant, or snack bar operated by the hospital or other medical facility). Despite their disposable packaging, sales of food and beverages served in disposable containers are subject to tax when the food and beverage is for consumption on the premises. Beverages and cold food products sold à la carte may not be taxable when sold on a "to go" basis.

Sales of hot food and edible nonfood items such as alcoholic and carbonated beverages are taxable no matter where they are sold (see exceptions for Patient meals and Student meals (hospital schools) below).

Patient meals

Meals (including hot prepared food products) supplied or sold to patients or residents are exempt when sold or supplied by hospitals or other medical facilities. The exemption for patient meals is not affected by a food contractor serving the meals or selling the meals to a hospital or other medical facility that serves them. The exemption also applies to outpatients while they are in the hospital or other medical facility. However, sales of guest trays to visitors are not exempt as patient meals.

Sales of carbonated beverages, when served by the hospital as part of the patient's meal, regardless of whether a separate charge is made, are considered exempt.

The term "meals" also includes food provided to patients by way of enteral feeding, including Total Parenteral Nutrition (TPN) and Intradialytic Parenteral Nutrition (IDPN).

Student meals (hospital schools)

Meals and food products (including hot prepared food products) sold to students who are enrolled in a school operated by a hospital or other medical facility are not subject to tax. For this exemption to apply, the meals or food products must be furnished, prepared, or served for consumption at tables, chairs, or counters or from trays, glasses, dishes, or other tableware. This exemption does not apply to meals served to student volunteers, student nurses, interns, and so on, unless they are enrolled at the school operated by the hospital or other health facility.

The exemption for student meals only applies when meals and food products are sold to students by schools. The exemption generally does not apply if a caterer or independent food contractor sells meals directly to the students. However, independent food contractors or caterers will qualify for the exemption if the contract and records with the school show that all of the following conditions are met:

  • The facilities used to serve meals to the students are used by the school for other purposes,
  • The fixtures and equipment used to prepare and serve the meals are owned and maintained by the school, and
  • The students purchasing the meals cannot distinguish between the independent contractor or caterer and the employees of the school.

Sales of nonfood beverages, such as carbonated beverages, beer, and wine, are exempt when included in a meal that is sold for a single price. Nonfood beverages are not exempt when sold alone or sold with food items, but individually priced.

Nonreusable items—such as napkins, straws, disposable dinnerware, paper or foam plates or bowls, disposable drink cups, isolation trays, paper covers for cups, and plastic wrap—are considered to be included in the price for the food or beverage. Consequently, you can purchase these items without tax by issuing a resale certificate to your vendor. Items which are reusable—such as china, silverware, glasses, on so on—are not considered sold with a meal and tax must be paid when purchased (or if purchased from an unregistered out-of-state retailer reported under Purchases subject to use tax of your sales and use tax return).

Items used to dispense enteral feeding, TPN, or IDPN—such as bags, tubes, filters, tape, clamps, and connectors—are also considered nonreusable items that become components of the meals. For more information, see Regulation 1503 (a)(2)(C).

Disposable menus used by patients to order meals are not component parts of meals. Consequently, you must generally pay tax reimbursement when you purchase those items (or if purchased from an unregistered out-of-state retailer reported under Purchases subject to use tax of your sales and use tax return).

Coin-operated machines

Commissions received from vending machine operators who have placed vending machines on your premises are not subject to tax.

Some hospitals and other medical facilities, however, operate their own vending machines. If you operate your own vending machines, you are generally required to report tax on a portion of all food product sales, including sales of beverages, hot prepared food products, candy, and candy-coated gum (excluding bulk vending machine sales). For more information about how to report these sales, see Regulation 1574, Vending Machine Operators. For an explanation of how to calculate tax, see publication 118, Vending Machine Food Sales.

Revision June 2026