The South Carolina Administrative Law Court recently ruled that cafeteria food sales by a public hospital were taxable.
The taxpayer was a publicly owned hospital in South Carolina. The hospital argued that it qualified as a charitable organization and so was allowed to make exempt food sales.
South Carolina exempts the gross proceeds of sales made by charitable organizations if the proceeds are used exclusively for the exempt purpose of the organization. However, the exemption excludes "charitable institutions in the nature of hospitals." As a result, the exemption did not apply, and food sales by the hospital were taxable.