Starting January 1, N.C. colleges will be required to charge sales tax on all food, including student meal plans.
Foodservice operations on North Carolina campuses will soon be required to pay sales tax on student meal plans. The North Carolina Tax Simplification and Reduction Act, effective Jan. 1, 2014, will require colleges to charge an 8.25% sales tax on all food—including students with meal plans. Many directors are still trying to figure out exactly how to comply with the new law.
North Carolina State University is one of the schools mapping out their plans for next year. The university has never had to charge sales tax on any of its meal plans. Currently, about 9,000 students purchase a meal plan. “We are known for having some of the most attractive meal plan rates,” says Senior Director of Hospitality Services Randy Lait. “We have set new records for our meal plans, and in one swoop a huge factor of our meal plans is eliminated.” Lait isn’t sure yet how meal plans will change, but he is concerned that students will stop purchasing meal plans following the tax change.
The new law will cost N.C. State about $850,000 in tax liability. “We need to explain to the students how the law came to be,” Lait says. “We also need to explain why we have to pass some of this [cost] off to students since it’s something we cannot absorb [ourselves] given the amount.”
Although N.C. State’s plan of action isn’t finalized, students are aware that there is going to be a change. “The students may not be pleased, but there haven’t been riots of pitchforks and torches,” Lait says. “We keep them informed and they understand why it happened. We don’t plan on changing the meal plans and we will be sure to show sales tax on the bills we mail out.”
While N.C. State students are aware of the new changes, Belmont Abbey students aren’t quite in the loop yet. Belmont Abbey College, in Charlotte, is gathering information about how the new law will affect its meal plans. Administers recently attended a conference, along with other N.C. colleges and institutions, about the new law.
“There is no guidance from the state, even though it’s a state law,” says Paul Reinecke, dining services director with Chartwells. “We are still trying to get a clear answer on what they are trying to tax.”
Belmont Abbey is looking into using the average meal swipes per student as a basis for determining how to incorporate the sales tax into meal plans, although dining services has yet to determine exactly how that would work. The school will most likely have to pass the cost on to students, according to Reinecke.
There are about 700 students on different meal plans at Belmont Abbey, most of whom are unaware of the new law, Reinecke says. “It could potentially hurt us by passing along the cost to students,” he adds.
The University of North Carolina at Charlotte also is still in fact-finding mode and is attending a meeting with a state controller and third party this month to discuss further plans of action. The school is currently working with a third party on different plan options.
“We are focusing on keeping students’ buying power the same,” says Bill Bremer, resident district manager with Chartwells. “We plan on increasing meal plan costs while keeping the same amount of money on a student’s card the whole semester.” Bremer plans to increase meal plans by the 8.25% sales tax instead of charging sales tax to individual transactions at the point of sale. That way, students will have the same amount of funding to use throughout the semester. If sales tax were charged to individual transactions and meal plan prices remained the same, students would run out of dollars more quickly.
UNC Charlotte plans to go public with its final decision by posting the update on social media outlets and the college’s website.
“We won’t have time to waste about getting the word out once we have a final decision,” Bremer says.
Students have told dining services that they want the school to pay for the sales tax for them and that they are worried about paying more for the same meal plan option. The school is working on making this transition easy for the students, but “it is a law that students will have to get used to,” according to Bremer.