Effective July 23, 2023, Washington state has revised its tax rules regarding meals provided to residents of senior living communities. If the charges for food, drinks, and meals are not separately stated in the rental agreement, they will no longer be subject to sales or use tax. Instead, the value of these meals will be subject to business and occupation (B&O) tax under the “Service and Other Activities” classification. Senior living communities that do charge separately for food, drinks, or meals must continue to collect sales tax.
For the period of July 1 to July 22, 2023, the value of meals served falls under the B&O “Retailing” classification, and retail sales tax must be collected on the amounts. However, starting from July 23, 2023, the classification shifts to “Service and Other Activities,” exempting the meals from retail sales tax or retailing B&O tax.
The Washington Department of Revenue (DOR) has provided formulas and examples for proper tax calculation on meals provided as part of the residents’ rental or residency agreement when no separate charge is made for the month of July 2023. The guidance can be found on the DOR webpage.
It’s important for senior living communities in Washington state to understand this transition and to calculate the applicable taxes correctly. If separate charges for food, drinks, or meals are made, sales tax collection on those amounts remains necessary. (Washington State Department of Revenue Announcement, July 2023)