Sodexo America, LLC v. City of Golden
2017 COA 118
| Colo. Ct. App. | 2017Background
- Sodexo contracted with Colorado School of Mines (Mines) to operate campus dining, prepare and serve meals, and manage branded retail outlets; the contract treats the food provided as Mines’ property and requires Mines’ approval for price changes.
- Mines sells mandatory or optional meal plans to students, collects payment, issues BlasterCards, and keeps unused meal/Munch Money balances at semester end; students contract with Mines, not Sodexo.
- Mines reports meal redemptions to Sodexo and Sodexo invoices Mines at pre-agreed per-meal prices (significantly lower than the prices Mines charges students).
- The City of Golden levies a 3% sales tax on food sales under the Golden Municipal Code and has assessed Sodexo for taxes on transactions when students swipe BlasterCards for meals (City calculated tax based on the price Mines pays Sodexo).
- Sodexo sued, arguing the City’s assessment is improper because no retail sale to students occurs and Sodexo’s sales to Mines are wholesale and therefore exempt under the Code; the district court granted summary judgment for the City, and Sodexo appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a taxable sale occurs when a student swipes a BlasterCard for a meal | Sodexo: No sale occurs at swipe; student paid Mines earlier, not Sodexo; swipe merely reduces future meal entitlement | City: A sale occurs at the point the student obtains the meal (swipe) and is taxable | Held: No sale by Sodexo occurs at the swipe because Sodexo receives no consideration from the student at that moment |
| Whether Sodexo’s transactions with Mines are taxable retail sales or wholesale sales exempt from tax | Sodexo: Sales to Mines are wholesale (sales for resale to students), so exempt under GMC wholesale exemption | City: Transactions are not wholesale; Sodexo’s delivery/service to students supports retail taxability | Held: Sodexo’s sales to Mines qualify as wholesale sales under the Code and are exempt |
| Applicability of Code definitions (sale, gross sales, wholesale) to parties’ contracts and facts | Sodexo: Code requires receipt of consideration by seller; Mines, not students, provides consideration to Sodexo; Mines is a licensed retailer reselling meals | City: Emphasizes delivery to students and ultimate consumer status to support taxation | Held: Code definitions construed (narrowly for tax imposition) show consideration flows from Mines to Sodexo and Mines resells meals, satisfying wholesale definition |
| Whether precedent or competing divisions require a different result (e.g., Aramark decision) | Sodexo: Prior authority supports wholesale treatment; economic substance controls | City: Points to other division decision (Aramark) creating doubt | Held: Court rejects the ‘‘tenable argument’’ approach; declines to follow Aramark and applies plain language and economic-substance tests to find exemption applies |
Key Cases Cited
- A.B. Hirschfeld Press, Inc. v. City & County of Denver, 806 P.2d 917 (Colo. 1991) (articulates primary-purpose test for wholesale purchases)
- Slater Corp. v. South Carolina Tax Comm’n, 242 S.E.2d 439 (S.C. 1978) (holds college food-service supplier sales are purchases for resale to students)
- Hodgson v. Crotty Bros. Dallas, Inc., 450 F.2d 1268 (5th Cir. 1971) (characterizes similar campus food transactions as sales for resale rather than direct retail sales)
- Hodgson v. Prophet Co., 472 F.2d 196 (10th Cir. 1973) (distinguishable facts where college acted merely as collection agent rather than purchaser)
- Frank Lyon Co. v. United States, 435 U.S. 561 (1978) (transaction form and economic substance govern tax characterization when bona fide commercial arrangements exist)
- Associated Dry Goods Corp. v. City of Arvada, 593 P.2d 1375 (Colo. 1979) (taxing statutes construed narrowly; doubts resolved for taxpayer)
- Catholic Health Initiatives Colo. v. City of Pueblo, 207 P.3d 812 (Colo. 2009) (tax exemptions construed narrowly in taxing authority's favor)