The Pennsylvania Department of Revenue recently issued Legal Letter Ruling No. SUT-05-004, which stated that free meals provided by a restaurant to its employees or patrons were not subject to sales and use tax. The Department of Revenue concluded that the free meals were not subject to tax on the statutory language that a basis for use tax is the provider’s acquisition of the property or services provided. In the case of the restaurant’s provision of free meals to its employees, the restaurant’s tax basis is the restaurant’s acquisition of the food that was incorporated into the free meals. The letter ruling states that assuming the restaurant purchases the food incorporated into the meals from food wholesalers, distributors, grocery stores or other non-eating establishments, the restaurant’s purchase of the food is nontaxable; therefore, there is no tax basis. However, use tax is due on any soft drinks provided free of charge to the restaurant’s employees or patrons. (Pennsylvania Department of Revenue, Legal Letter Ruling No. SUT-05-004, March 28, 2005)