The Illinois Department of Revenue has recently issued an alert reminding food vendors of their collection obligations on sales of ready-made meals for school lunch programs. The alert covers three common scenarios.
First, tax applies when a third-party vendor sells meals directly to students. Tax applies regardless of whether a school or parent-teacher organization (PTO) facilitates the sales. It does not matter whether a portion of proceeds are donated to the school or PTO.
Second, tax applies when a PTO sells meals to students. PTOs can purchase meals tax-free for resale. Note that a PTO can make tax-free sales of meals to students for two days per calendar year.
Third, tax does not apply to sales of meals to students by schools if the sales occur on school property and the sales are limited to students and employees. Schools can purchase these meals exempt from tax as long as they provide the vendor with an exemption number.