By: Yitzchak Carroll and Yosef Lemel | Features  | 

Law Review: The Legality of ‘Caf Daddying’

As the year comes to an end, the time-honored tradition of “Caf Daddying” — the sharing of Caf Card meal plan funds with fellow students — is manifest in the Furman Cafeteria, the Kushner Dining Hall and the various eateries on and in the vicinity of the Beren and Wilf campuses. Altruistic students who wish to share excess meal funds with others attempt to evade university policies, which YU claims are based on state law. But is there any truth to this?

According to rules promulgated by University Dining Services, YU Caf Card funds are non-transferable — even between siblings — and are non-refundable at the end of the academic year. Students upload a fixed amount of money to their accounts at the beginning of the semester and are able to purchase food without incurring tax throughout the semester at on-campus dining facilities, as well as participating off-campus restaurants and establishments. Unused money rolls over from the fall semester to the spring semester, but not to the summer season, nor to the following fall. Additionally, the university limits bulk purchases to $100 per day and does not allow students to purchase more than six of the same item on one day. Failure to abide by these rules can lead to the confiscation of one’s Caf Card and the remaining balance on the account. The university further justifies this policy by citing analogous rules in place at other universities throughout New York State.

Under New York law, sales tax is required to be charged on purchases made from restaurants, taverns, caterers and vending machines. See e.g. N.Y. Tax Law § 1105(d). However, the statute provides an exemption, inter alia, for purchases of items made at authorized universities — with the exclusion of alcoholic beverages — in instances in which the transaction is made “under a contractual arrangement whereby the student does not pay cash at the time he is served,” referring to university meal plans. See N.Y. Tax Law § 1105(d)(ii)(b). Meals sold at elementary, middle and high schools are exempt from tax under this statute as well. Id.

Indeed, many university-based student meal plans operate on a “swipe system,” under which students purchase a given number of swipes prior to the semester, and do not receive a refund for unused swipes. This policy is codified in New York administrative law. See 20 NYCRR § 527.8(h)(2).

However, even with respect to monetary-based systems — such as the one in place at Yeshiva University, in which students purchase a non-refundable, dollar-based plan at the beginning of the academic year — the law appears to bar refunds and transfers. Pursuant to 20 NYCRR § 527.8(h)(3), if a university allows for payment via a transferable, non-personal “scrip” — essentially, an electronic card — the meal plan would be subject to tax. However, if such a “scrip”-based system is created with mechanisms to ensure its non-transferability and non-refundability based on the unused balance of a given student’s account, the plan would be exempt from sales tax pursuant to the provisions of N.Y. Tax Law § 1105(d)(ii)(b). See e.g. In re: Jody Ann Michelman, TSB-A-84(8)S. Accordingly, “Caf-Daddying” through the sharing and/or refundment of meal plan funds would incur liability to pay tax.

The university justified its meal plan rules, which allow dining funds to be carried over from the fall semester to the spring, but not to the summer semester, by citing protocols in place at other higher education institutions. “Similar to the practices of many colleges and universities in New York State, Yeshiva’s meal plan allows for a carryover of unused meal plan monies only through the end of the spring semester, which corresponds to the end of the contractual meal plan period and academic year,” said Randy Apfelbaum, the University’s Chief Facilities and Administrative Officer. Apfelbaum claimed that due to the non-taxable status of YU’s meal plan, students are afforded “an almost 9 percent discount.”

The legality of the OMNI fund program in place at YU, in which a portion of meal plan funds may be applied towards outside restaurants, is a bit more checkered with respect to tax exemption. The statute specifies that a restaurant must be located “on the premises of a college, university or school” to be eligible for inclusion in a tax-exempt student meal plan. See N.Y. Tax Law § 1105(d)(ii)(b). A New York-based university placed students into a nearby hotel for the purpose of overflow housing, and students used their meal cards to swipe into the breakfast bar at the hotel. In an advisory opinion, the New York State Department of Taxation and Finance ruled that tax must be paid on these off-campus meals, which do not fall into the narrow statutory exemptions for student meal purchases. See NY Adv Op Comm T & F TSB-A-92-(68)I. The legality of the tax-exempt status of YU’s OMNI plan is questionable.

YU contends that as the university’s campuses “are located in an urban environment without defined campus boundaries,” students are able to use their meal plan funds at participating restaurants in the vicinity of YU campuses and dormitory facilities. A YU spokesperson did not state any statutory authority or precedent in administrative or case law that allows for such a program.

No basis could be found in the law for YU’s policies limiting daily purchases to a maximum limit of $100, and further prohibiting students from buying more than six of the same item on a given day. “The limits are in place for inventory control purposes to ensure the availability of products for all students and to avoid unanticipated shortages due to significant one-time purchases,” Apfelbaum said.

State lawmakers contacted by The Commentator in reference to the laws governing university meal plans were largely unaware that current New York law barred refunds to students. Several legislators pledged to look into changing the laws governing student meal plan refunds.

A university spokesperson did not comment as to whether YU and its contracted lobbying firms would oppose legislation mandating students be refunded their unused meal plan money.

"I’m glad that this issue was brought to my attention,” said State Sen. Liz Krueger (D-Manhattan), who chairs the Senate Finance Committee. “We should be doing all we can to help make college more affordable. My office is reviewing current tax law and regulations — hopefully we can develop a solution that will allow both students and colleges to save money.”

State Sen. Toby Ann Stavisky (D-Queens), chair of the Senate Higher Education Committee, will push the State Department of Taxation and Finance to “reconsider” the administrative regulations it has promulgated barring student meal plan refunds, according to her spokesperson, Sabiel Chapnick.

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Photo Caption: The Furman Cafeteria on the Wilf Campus
Photo Credit: The Commentator