Senior Living Facility Meal Taxability in Washington State

This is an article updating information originally shared in this article by Joe Haberzetle, JD, LLM.

Should retirement communities, assisted living facilities, and other similar facilities charge sales tax on the meals provided to their residents? The Washington Department of Revenue (DOR) has issued updated guidance on this question, providing information on the taxability of meals offered by senior living and care facilities. This information is significant for operators of retirement communities, assisted living facilities, and independent senior living residences, as it clarifies when sales tax applies to meals furnished to residents.

Historical Treatment

In Washington, sales of prepared meals, such as those served in restaurants and cafeterias, are generally subject to retail sales tax. Historically, the DOR has exempted meals provided by licensed healthcare facilities (e.g., hospitals, nursing homes, assisted living, and boarding homes) when included as part of resident care services. Conversely, bundled charges for rent and meals to independent living residents not receiving healthcare services have been subject to Business & Occupation (B&O) tax under the retail classification.

Under prior law, facilities offering healthcare services could be penalized for failing to collect sales tax on meals provided to residents of independent living facilities who did not receive healthcare services. In such cases, tax was applied even when meals were not separately itemized. If no selling price was recorded, the DOR assessed tax on twice the meal cost, including food, preparation, service, incidental expenses, and overhead.[1]

Current Law Effective July 23, 2023

Effective July 23, 2023, meals furnished to independent living residents in senior living communities as part of a rental or residency agreement are exempt from retail sales and use tax. These transactions are still subject to B&O tax under the Service and Other Activities B&O tax classification. However, this only applies if tenants are not separately charged for meals. If meals are separately stated on an invoice or agreement, they remain subject to retail sales tax and B&O tax under the retailing classification. This exemption applies only to facilities licensed or registered under RCW 18.20 or 18.390.[2]

Healthcare Facilities

For facilities that provide healthcare services, meals continue not to be subject to sales tax when served to residents or patients. However, they are still subject to B&O tax under the Service and Other Activities classification, per WAC 458-20-168(7)(b)(i). This includes licensed boarding homes, hospitals, nursing homes, and assisted living facilities. This treatment is consistent with prior guidance and remains applicable under current law.

As long as a facility qualifies as an assisted living facility, nursing home, or licensed boarding home under Washington law, the meals provided to residents as a part of a bundled charge for rent and healthcare services are exempt from sales tax for tax purposes. The income of those facilities remains subject to B&O Tax under the Licensed Boarding Homes or Service and Other Activities classification. Thus, even if a facility includes an independent living area and provides dining services through a restaurant or cafeteria for its residents, the meals served to such residents are exempt from tax when included as part of a bundled charge for rent and services. This exemption applies in the same manner as meals provided to residents in assisted living or nursing care. Furthermore, meals furnished to independent living residents remain nontaxable when they are included as part of a bundled rental agreement.

Sales to Non-Residents

Meals sold to non-residents, such as visitors, employees, or doctors, are taxable under existing regulations, regardless of the facility’s healthcare status. Informal guidance posted on the DOR’s website does not override the rules provided in WAC 458-20-168(7)(b)(iv).

Compliance Considerations

Senior living operators should review their residential lease agreements to determine whether meals are separately charged. Beginning July 23, 2023, facilities providing exempt meals must report sales under the Service and Other Activities B&O tax classification, while separately charged meals and meals sold to non-residents remain subject to retail sales tax and retailing B&O tax. Facilities that separately charge for meals must continue to collect sales tax. Accurate documentation of pricing and classification is essential for audit purposes.

Action Steps for Senior Living Facilities

1. Review rental and residency agreements to determine if the facility was previously collecting sales tax on meal charges.
2. Update sales tax reporting systems to reflect exemptions for qualifying meals.
3. Ensure compliance with B&O tax reporting by categorizing qualifying meals under the Services classification and ensuring that separately stated meals are still categorized under Retailing for B&O purposes.
4. Consider future tax planning to determine whether to adjust pricing models to include meals within rental or residency agreements.

Please do not hesitate to get in touch with Clark Nuber for assistance with Washington sales and use tax laws and how they apply to your specific facts, or to discuss any other matters relating to state or local taxes.

[1] Washington DOR – Meals Provided to Senior Residents.

[2] Senior Living Communities – Tenant Meals – Sales and Use Tax Exemption.

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