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State, Department of Revenue v. Morrison Cafeterias Consolidated, Inc. of Delaware
Citations: 487 So. 2d 895; 1985 Ala. Civ. App. LEXIS 1108Docket: Civ. 4388
Court: Court of Civil Appeals of Alabama; January 29, 1985; Alabama; State Appellate Court
On October 12, 1983, the Alabama Department of Revenue imposed a sales tax assessment of $94,221.51 against Morrison Cafeterias Consolidated, Inc., which Morrison subsequently appealed. The Circuit Court of Mobile County ruled in favor of Morrison, abating the assessment, prompting the Revenue's appeal. Morrison operates a restaurant, preparing food for retail sale, and offers its employees unlimited meals through an Employee Meals Program at no cost, with the average meal cost factored into overall business expenses. The Revenue argues that the value of these meals should be subject to sales tax, citing Alabama's sales tax law provisions regarding "self-consuming" transactions. Specifically, it references sections defining retail sales, which include withdrawals for personal use without a sale to another party. However, the court disagrees, aligning with precedent cases where the Alabama Supreme Court ruled that no sales tax is owed for food consumed by restaurant employees, viewing it as incidental to the business's overall operations. Revenue contends that the case of Burns is not binding authority because it predates the amendment adding the self-consuming feature to the sales tax law. However, the Windham case, decided post-amendment in 1947, affirmed that this addition does not alter the outcome of Burns. Revenue acknowledges that both Burns and Windham support Morrison's argument that employee food withdrawals are exempt from sales tax but urges a reevaluation based on more recent rulings that categorize such withdrawals as taxable. Revenue cites cases including Alabama Precast Products, which involved a taxpayer withdrawing raw materials for a contract, but the court ruled these withdrawals were for personal use, not taxable sales. In contrast, Burns and Windham involved food intended for resale, with the value of employee-consumed food included in retail prices, thus not avoiding sales tax. The self-consuming feature's purpose is to tax otherwise unassessed transactions, which does not apply here. The court determined that food provided to Morrison's employees is not considered a retail sale but rather property prepared for sale, leading to the affirmation of the trial court's decision to vacate Revenue's sales tax assessment.