City of Golden v. Sodexo America, LLC

Opinions of the Colorado Supreme Court are available to the
public and can be accessed through the Judicial Branch’s homepage at
http://www.courts.state.co.us. Opinions are also posted on the
Colorado Bar Association’s homepage at http://www.cobar.org.
ADVANCE SHEET HEADNOTE
May 20, 2019
2019 CO 38
No. 17SC735, City of Golden v. Sodexo America, LLC—Taxation—Sales Tax—
Wholesale Tax Exemption.
In this sales tax dispute, the supreme court considers whether a food service
vendor to a university sold meals directly to students with meal plans at retail, or whether
the vendor sold those meals to the university at wholesale. If the meal-plan meals were
sold at retail to the students, they would be taxable under the relevant municipal
ordinances; if the meals were sold at wholesale to the university, then they would be
exempt from taxation.
After examining the plain language of the ordinances, the supreme court holds
that the food service vendor sold the meal-plan meals to the university at wholesale, and
therefore, the transactions were tax-exempt. Accordingly, the supreme court affirms the
decision of the court of appeals.
The Supreme Court of the State of Colorado
2 East 14th Avenue • Denver, Colorado 80203
2019 CO 38
Supreme Court Case No. 17SC735
Certiorari to the Colorado Court of Appeals
Court of Appeals Case No. 16CA1355
Petitioners:
City of Golden, Colorado and Jeff Hansen, in his official capacity as Finance Director of
the City of Golden, Colorado,
v.
Respondent:
Sodexo America, LLC.
Judgment Affirmed
en banc
May 20, 2019
Attorneys for Petitioners:
Williamson & Hayashi, LLC
David S. Williamson
Mathew M. Munch
Boulder, Colorado
Attorneys for Respondent:
Silverstein & Pomerantz LLP
Neil I. Pomerantz
Mark E. Medina
Michelle Bush
Denver, Colorado
Attorneys for Amicus Curiae Colorado Department of Revenue:
Philip J. Weiser, Attorney General
Russell D. Johnson, Assistant Solicitor General
Denver, Colorado
Attorneys for Amici Curiae Colorado Higher Education Institutions:
Philip J. Weiser, Attorney General
Stephanie Scoville, Senior Assistant Attorney General
Denver, Colorado
Jeremy Hueth, Special Assistant Attorney General
Denver, Colorado
Attorney for Amicus Curiae Colorado Municipal League:
Dianne M. Criswell
Denver, Colorado
JUSTICE HOOD delivered the Opinion of the Court.
2
¶1 Imagine that two students enter a dining hall at the Colorado School of Mines in
the City of Golden. One pays with cash; the other swipes a “BlasterCard” to use a
meal-plan credit. Sodexo, Mines’ food service provider, collects sales tax on the cash
transactions and remits the tax to Golden. Not so when a student swipes a BlasterCard
to use a meal-plan credit. That disparity in tax treatment culminated in this case.
¶2 A little background information about BlasterCards helps to flesh out the legal
dispute. During the time at issue, Mines loaded each meal-plan student’s BlasterCard,
which is a student’s identification card, with an individual meal plan choice. To use their
meal plans, students swiped their BlasterCards at a dining facility. Sodexo had nothing
to do with loading the students’ BlasterCards with their meal plans—that was all Mines.
Sodexo also had no way of knowing if a student had fully paid for his or her meal plan,
and Sodexo had no way of enforcing collections against a student who hadn’t fully paid.
Again, that was all taken care of by Mines. But neither Mines nor Sodexo collected any
sales tax on these meal-plan meals.
¶3 When Golden’s Finance Department audited Sodexo and discovered that sales tax
for these meal plans had not been collected, it issued a sales and use tax assessment.
Sodexo protested and lost, so Sodexo appealed to the district court. The court granted
summary judgment for Golden, finding that Sodexo had engaged in taxable retail sales
directly to Mines’ students, rather than tax-exempt wholesale sales to Mines.
¶4 Undeterred, Sodexo appealed again. This time, a unanimous division of the court
of appeals reversed the judgment of the district court, concluding that there were two
sales transactions at issue: one between Mines and Sodexo, and the other between Mines
3
and its students. The division further concluded that Mines and Sodexo were engaged
in tax-exempt wholesale transactions. Accordingly, the division remanded for entry of
judgment in Sodexo’s favor.
¶5 We granted Golden’s request to review the division’s decision. But, having done
so, we agree with the division that two transactions took place: one between Sodexo and
Mines, another between Mines and its students. Like the division below, we conclude
that Sodexo sold the meal-plan meals to Mines at wholesale, and, accordingly, these
transactions were exempt from taxation under the Code. We therefore affirm the
judgment of the court of appeals.
I. Facts and Procedural History
¶6 Mines is a public post-secondary education institution. At all relevant times, it
required all students residing in an on-campus residence hall to purchase a meal plan.
¶7 Mines and its students entered into Residence Hall Contracts, which detailed the
various meal plans available for purchase and the prices per plan. These contracts also
outlined the number of meals included in each meal plan option, as well as the amount
of “Munch Money,” a declining balance of points loaded onto each student’s
identification card that was accepted at any on-campus dining facility, apportioned to
each plan. Students with meal plans paid Mines directly for the cost of the plans.
¶8 In May 2011, Mines separately contracted with Sodexo to fulfill its obligations to
provide meals and food options for its students. Sodexo agreed to “provide food services
for [Mines’] students, faculty, staff, employees and guests.” “Food services” was defined
as “the preparation, service and sale of food, beverages, and select goods, merchandise
4
and other items to be agreed upon by [Mines] and [Sodexo] . . . including catering,
concessions, retail and meal plans.” Mines agreed to purchase meals exclusively from
Sodexo that Sodexo would then prepare and serve at Mines’ dining facilities. The
contract required Sodexo to operate and manage all of Mines’ dining facilities using its
own employees, not Mines’ employees.
¶9 Though Mines delegated the actual food services preparation, service, and sales to
Sodexo, it retained much contractual authority over the way Sodexo provided these
services. The products Sodexo produced pursuant to the contract became the sole
property of Mines. Mines set the prices of the meal plans, and those prices could only
change with Mines’ prior written approval. Mines also required Sodexo to meet its food
quality standards. The contract even included a provision giving Mines the authority to,
“at its discretion, require inclusion of certain foods and food supplies, or specific brands
in the inventory and menus of [Sodexo].”
¶10 Cash-paying students, faculty, and staff paid Sodexo directly at the register. (And
Sodexo collected sales tax from its cash-paying patrons, as required by Golden’s
Municipal Code.) However, that wasn’t the case for the students using meal plans or
Munch Money. Receiving payment from those students took two steps.
¶11 Step One: the BlasterCards. As noted, students purchased meal plans and Munch
Money from Mines through their Residence Hall Contracts. Each BlasterCard was linked
to a student’s account and loaded with the student’s meal plan and Munch Money
balance. Students then swiped their cards to obtain meals at a dining hall or use their
5
Munch Money. Each swipe of a BlasterCard reduced the number of available meals or
Munch Money left for the semester.
¶12 Step Two: the invoices. Sodexo provided Mines with reports detailing student
participation in the meal plans. Using these reports, Sodexo then invoiced Mines based
on the student participation in the meal plans and the per-meal price established in the
contract. Those prices were far less than the per-meal prices Mines charged students
through their Residence Hall Contracts. And Mines kept the difference.
¶13 Sodexo didn’t directly charge the meal-plan students—that responsibility fell to
Mines. Mines billed each student at the beginning of the semester for the cost of their
tuition, room and board, which included the meal plan, and other fees. And as noted,
Students paid Mines directly, and those funds were placed into a deposit account where
the funds “intermingled” with Mines’ other funds. Mines didn’t set the students’
payments aside for Sodexo. Rather, Mines paid Sodexo monthly from its general deposit
account, presuming it had sufficient budgeted funds for this purpose from the State.
¶14 If a student was derelict in paying her meal plan fees under the Residence Hall
Contract, then Mines alone had the authority to take action against that student. Mines
could place a hold on a student’s account or prevent a student from entering a dining
facility. Sodexo, on the other hand, had no recourse against a student who failed to pay
her meal plan charges. And, Sodexo had no way of knowing whether a student’s account
was up-to-date or in default.
¶15 Golden audited Sodexo, and in November 2014, it levied a three percent tax
amounting to $234,481 covering the period from June 2011 through March 2013. This
6
amount was not based on the amount the students paid Mines for their meal
plans; instead, it was based on the lower prices that Mines paid Sodexo. Sodexo protested
the assessment. After a hearing, Golden denied Sodexo’s appeal through the city’s
Finance Director, who concluded that Sodexo was involved in taxable retail sales.
¶16 Sodexo filed an appeal in the district court, arguing, in part, that the services
Sodexo provided pursuant to its contract with Mines were tax-exempt wholesale
transactions under Golden’s Municipal Code. Golden countered that Sodexo “is engaged
in non-exempt retail sales directly to dining patrons and is not making wholesale sales to
[Mines].”
¶17 Both parties moved for summary judgment. The district court ruled for Golden,
concluding that Golden established that there was no genuine issue of material fact, and
“that there is significant doubt that Sodexo is entitled to [Golden’s Municipal Code’s]
wholesale sales exemption.” In coming to this conclusion, the court cited City of Golden
v. Aramark Educational Services, LLC, 2013 COA 45, 310 P.3d 262, for the proposition that
tax exemptions must be construed narrowly and in favor of the taxing authority. The
trial court pointed to two facts that raised doubts as to whether Mines acquired Sodexo’s
food and food services for resale: (1) Mines didn’t obtain physical possession over the
food items because the food was solely in Sodexo’s possession until served to the
meal-plan students, and (2) Mines’ purpose in buying food and food services from
Sodexo was to fulfill its contractual obligations to the meal-plan students, as set out in
the Residence Hall Contracts. Accordingly, the trial court reasoned that because it “must
7
resolve these doubts against the exemption,” Sodexo did not meet its burden to establish
a genuine issue of material fact supporting its claim for tax exemption.
¶18 A unanimous division of the court of appeals reversed. It reasoned that
“consideration is exchanged for food on two occasions: once when a student pays Mines
for a meal plan or Munch Money, and again when Mines pays Sodexo periodically based
on the number and types of meals provided to [the meal-plan] students.” Sodexo Am.,
LLC v. City of Golden, 2017 COA 118, ¶ 21, __ P.3d __. The division concluded that Sodexo
and the meal-plan students “aren’t engaging in a buyer-seller transaction” because, by
using their BlasterCards, these students weren’t giving Sodexo consideration for the food
and services they obtained. Id. at ¶¶ 20–21. Instead, the students were merely reducing
the amount of meals or Munch Money available under their meal plan. Id. at ¶ 21. The
division then considered what type of sales occur when Mines pays Sodexo for meals:
taxable retail sales or tax-exempt wholesale sales? The court of appeals held that Sodexo
sells meal plans to Mines at wholesale and, since the Golden Municipal Code expressly
exempts wholesale transactions from taxation, Golden’s assessment was invalid. Id. at
¶¶ 27–29. The division recognized that its holding conflicted with another division’s
opinion in Aramark, which held just the opposite—that a different food service vendor for
Mines was not entitled to the wholesale exemption. See id. at ¶¶ 34–36.
¶19 Golden filed a petition for certiorari, arguing that Sodexo was engaged in direct
retail sales to all students, including those students with meal plans, and therefore was
not entitled to the wholesale sales exemption. According to Golden, Mines was just a
collection agent—merely receiving money from the students with meal plans and
8
transferring those sums to Sodexo. Sodexo argues that it was engaged in tax-exempt
wholesale sales to Mines, not direct retail sales to the meal-plan students.
¶20 We granted certiorari.1
II. Analysis
¶21 We begin with a brief recitation of the applicable standard of review and
interpretive principles. We then turn to the relevant provisions of Golden’s Municipal
Code. Focusing on the plain language of these ordinances, we conclude that two
transactions occurred here—one between Mines and Sodexo, another between Mines and
its students. Then, based on our interpretation of the Code’s provisions, we determine
that Mines and Sodexo were engaged in wholesale transactions. We ultimately conclude
Sodexo was entitled to the wholesale sales exemption.
A. Standard of Review & Interpretive Principles
¶22 This court reviews a trial court’s grant of summary judgment de novo. Rocky
Mountain Expl., Inc. v. Davis Graham & Stubbs LLP, 2018 CO 54, ¶ 27, 420 P.3d 223, 229
(citing Hardegger v. Clark, 2017 CO 96, ¶ 13, 403 P.3d 176, 180). Similarly, the
interpretation of a municipal ordinance is a question of law and thus subject to de novo
review. Town of Erie v. Eason, 18 P.3d 1271, 1274 (Colo. 2001).
1 We granted certiorari to review the following issue:
1. Whether the court of appeals erred in determining that Sodexo sells food
to the Colorado School of Mines at wholesale, such that the subject
transactions are exempt from taxation under the Golden Municipal
Code.
9
¶23 When interpreting a municipal ordinance, we employ our well-worn tools of
statutory interpretation. See MDC Holdings, Inc. v. Town of Parker, 223 P.3d 710, 717 (Colo.
2010). “Our primary task when interpreting local government legislation is to determine
and give effect to the intent of the body enacting it.” Id. So, we look first to the text of
the ordinance, and if it is clear and unambiguous, we apply it as written. Id. “[I]f the
language . . . is susceptible of more than one reasonable interpretation, and is therefore
considered ambiguous,” then we may turn to interpretive aids “to help determine which
of these reasonable interpretations actually embodies the legislative intent.” City & Cty.
of Denver v. Expedia, Inc., 2017 CO 32, ¶ 14, 405 P.3d 1128, 1132 (plurality opinion)
(citations omitted). Because we ultimately conclude that the Code is clear and
unambiguous, we don’t resort to additional constructive canons and interpretive aids.
B. Golden’s Municipal Code
¶24 Golden is a home-rule municipality and, as such, has the authority to levy and
collect taxes. Golden, Colo. Charter Preamble (2018); see also Colo. Const. art. XX, § 6.
¶25 Golden levies a three percent sales tax on the purchase price of “all sales of tangible
personal property and services specified in subsection 3.03.030(a).” Golden, Colo.,
Municipal Code § 3.03.010(a) (2015).2 “[S]ales tax” is the “tax to be collected and remitted
2Like the court of appeals, we apply the 2015 version of the Code. The briefs and the trial
court documents don’t clearly specify which code year has been used and, accordingly,
without any information to the contrary, we too will review the same ordinances that
were reviewed by the court below.
10
by a retailer on sales taxed under this Code.” Golden, Colo., Municipal Code § 3.02.010
(2015). So, a “sale” by a “retailer” triggers the taxable event.
¶26 The Code defines a “sale” or “purchase” as “the acquisition for any consideration by
any person of tangible personal property or taxable services.” Id. (emphasis added). The
Code specifies that “sale” or “purchase” includes “property and services acquired by . . .
[t]ransfer . . . of title or possession or both to tangible personal property.” Id.
(“Acquisition” is not expressly defined in the code. See id.) A “retailer” sells “tangible
personal property or services at retail.” Id. And a retail sale is defined broadly by what
it is not: “[A]ll sales except wholesale sales.” Id.
¶27 Subsection 3.03.030(a) of the Code outlines which sales transactions are subject to
tax, and it specifically includes “all sales of food, prepared food, or food for immediate
consumption.” Golden, Colo., Municipal Code § 3.03.030(a)(4) (2015). The Code also
exempts certain transactions from sales tax, including wholesale sales. Golden, Colo.,
Municipal Code § 3.03.040(13) (2015). A wholesale sale is a “sale[] to licensed retailers,
jobbers, dealers, or wholesalers for resale. Sales by wholesalers to consumers are not
wholesale sales.” § 3.02.010 (emphasis added). Those latter types of sales would
constitute taxable retail sales. See id.
¶28 We’ve already noted that a “sale” constitutes the taxable event, so we must
determine when the “sale” of the meals occurred. See id. A “sale” is completed when one
party acquires property, products, or services in exchange for consideration. We know
the students obtained their meals at the dining halls. We therefore must determine when
the students provided consideration for their meals. See id. Was consideration for the
11
meals exchanged when the students paid Mines for the meal plans, as Sodexo suggests?
Or, did the taxable event occur when the students swiped their BlasterCards and
physically obtained the meals, as Golden argues?
¶29 We agree with Sodexo and the division below. The “sale” of the meals occurred
when the students paid Mines for their meal plans as part of their Residence Hall
Contracts. While the students were the ultimate consumers of Sodexo’s food and food
services, that doesn’t establish that the meal-plan students bought their food from
Sodexo. Indeed, these students didn’t provide any consideration to Sodexo for the meals.
All these students did was swipe their BlasterCards at Mines’ dining premises. And the
students didn’t pay or promise to pay Sodexo anything with their swipe. There was no
“bargained-for” exchange between Sodexo and the students because Sodexo had no
control over the price of the meal plans—it was Mines that the students exchanged
consideration with. By the time the students swiped their BlasterCards, they have
already paid (or at least promised to pay) Mines for the meals—they did so when they
signed their Residence Hall Contracts and selected their meal plan. And Mines paid
Sodexo monthly for Sodexo’s provision of the meals obtained as part of the meal plans.
The “swipe” functioned as nothing more than an accounting mechanism that allowed
Mines to track the number of meals that a student had used. Sodexo didn’t sell its meals
directly to the meal-plan students; it sold the meal-plan meals directly to Mines.
¶30 So, we count two distinct transactions where consideration is exchanged for the
meal-plan meals. One, when the students paid Mines for their meal plans pursuant to
the Residence Hall Contracts, and two, when Mines paid Sodexo under the monthly
12
invoice. We must now consider what type of transaction occurred between Mines and
Sodexo to determine whether the transaction was taxable. Again, we agree with Sodexo
and the division below—these were wholesale sales transactions.
¶31 Sodexo purchased, prepared, and served food pursuant to its contract with Mines;
Mines sold that prepared food and those services to its students under the Residence Hall
Contracts at a higher price than what it paid Sodexo. A wholesale sales transaction occurs
when a seller sells a product to a buyer for that buyer to subsequently resell.
See § 3.02.010; see also Wholesale, Black’s Law Dictionary (10th ed. 2014) (defining
“wholesale” as “[t]he sale of goods or commodities usu[ally] to a retailer for resale, and
not to the ultimate consumer”). Sodexo’s sale of its food and services thus constituted a
“sale for resale,” and not a sale to the “ultimate consumer” because Sodexo didn’t receive
any consideration from the ultimate consumer, the students. Rather, it was Mines, acting
as a retailer, that sold Sodexo’s products and services to the ultimate consumer, the
students who purchased meal plans. Sodexo was therefore entitled to the wholesale sales
tax exemption in section 3.03.040(13).3
3Our resolution based on the plain language of the Code is further supported by our
common-law test laid out in A.B. Hirschfeld Press, Inc. v. City & County of Denver, 806 P.2d
917 (Colo. 1991).
At issue in A.B. Hirschfeld was whether a commercial printing company’s purchase
of pre-press materials, such as film and press plates, to fill customers’ orders constituted
a tax-exempt wholesale purchase or a taxable retail purchase. See id. at 919. We created
a primary purpose test for determining whether a transaction is wholesale: “[A] purchase
of an item of tangible personal property is a purchase for resale and therefore not a
purchase at retail if the primary purpose of the transaction is the acquisition of the item for
13
¶32 As noted, a different division of the court of appeals confronted the same
substantive legal question in Aramark that we address today: Whether Aramark, a
company that operated food service facilities on Mines’ campus, was engaged in retail
sales transactions with students on Mines’ meal plans or wholesale sales to Mines.
Aramark, ¶¶ 13–14, 310 P.3d at 266. The division concluded that the vendor couldn’t
claim the exemption. In reaching this conclusion, the division discussed the need to
construe tax exemptions narrowly and resolve any doubts against the party claiming the
exemption. Id. at ¶ 11, 310 P.3d at 265–66. The court then turned to the arguments
advanced and found both parties offered “several tenable arguments” supporting their
positions. See id. at ¶¶ 32–34, 310 P.3d at 269–70. The court then declined to decide whose
tenable argument was better. See id. at ¶ 35, 310 P.3d at 270. Instead, the court determined
that there was sufficient doubt as to whether the vendor was entitled to the tax
exemption. Id. Accordingly, because any such doubts should be resolved against the
resale in an unaltered condition and basically unused by the purchaser.” Id. at 921
(emphasis added).
Here, Mines purchased food and food preparation services from Sodexo, not for its
own use and consumption, but instead to sell that food and those services to its students,
thus fulfilling its contractual promises in the Residence Hall Contracts. This satisfies the
primary purpose test: Mines purchased food and food preparation services from Sodexo
for the primary purpose of reselling that food to its students in an unaltered condition.
See also Slater Corp. v. S.C. Tax Comm’n, 242 S.E.2d 439, 440 (S.C. 1978) (concluding that a
food service vendor was engaged in wholesale sales to a university because “[t]he meals
in question were clearly purchased for resale with the students buying their food from
the college[] rather than from [the food service vendor]”).
14
party seeking the exemption, the court held that the vendor wasn’t entitled to the tax
exemption. See id.
¶33 The Aramark division erred because it failed to give controlling significance to the
plain language of Golden’s Municipal Code. To the extent that Aramark conflicts with
our opinion here, we overrule it.4
III. Conclusion
¶34 We hold that Sodexo sold meal-plan meals to the Colorado School of Mines at
wholesale, and accordingly, these transactions were exempt from taxation under the
Code. We therefore affirm the court of appeals’ decision with directions to remand to the
district court for further proceedings consistent with this opinion.
4 We are not persuaded otherwise by Golden’s invocation of the Tenth Circuit’s decision
in Hodgson v. Prophet Co., 472 F.2d 196 (10th Cir. 1973), to support its claim that Mines was
merely acting as a collection agent for Sodexo.
In Prophet, the Tenth Circuit was tasked with determining whether a food service
vendor to a college was exempt from the minimum wage and overtime requirements of
the Fair Labor and Standards Act (FLSA). See id. at 201. The Tenth Circuit concluded
that, for purposes of the FLSA, the food service vendor was a “retail or service
establishment” because the college did not resell the food prepared by the vendor to the
students. Id. “[A]ll the college did was to act in the role of a collection agent, rather than
a purchaser” by collecting fees from the students and paying the vendor accordingly,
while keeping a portion for its trouble. Id. at 204–05. Golden urges us to similarly
conclude that Mines was merely a collection agent for Sodexo. Golden argues Mines did
just that: It charged its students a slightly higher price for Sodexo’s services, collected
payment on Sodexo’s behalf, and kept the difference as its collection fee. See id.
Prophet is distinguishable. There, a federal court interpreted a federal law. And one
with specific requirements and specialized definitions. Golden acknowledges as much,
but still urges us to follow the Tenth Circuit’s analysis and conclude that Sodexo directly
sold its meals to the students in retail transactions. But, here we are concerned with
municipal tax ordinances, not a federal labor statute.
15