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Sodexo America, LLC v. City of Golden

Court of Appeals of Colorado, Fourth Division

September 7, 2017

Sodexo America, LLC, Plaintiff-Appellant,
City of Golden, Colorado; and Jeff Hansen, in his official capacity as Finance Director of the City of Golden, Colorado, Defendants-Appellees.

         Jefferson County District Court No. 15CV31189 Honorable Christopher C. Zenisek, Judge.

          Silverstein & Pomerantz LLP, Neil I. Pomerantz, Mark E. Medina, Michelle Bush, Denver, Colorado, for Plaintiff-Appellant.

          Williamson and Hayashi, LLC, David S. Williamson, Mathew M. Munch, Boulder, Colorado, for Defendants-Appellees.

          Cynthia H. Coffman, Attorney General, Stephanie Scoville, Assistant Attorney General, Jeremy Hueth, Special Assistant Attorney General, Denver, Colorado, for Amici Curiae Colorado Higher Education Institutions.


          J. JONES JUDGE

         ¶ 1 Sodexo America, LLC (Sodexo) provides food services and food to the Colorado School of Mines (Mines) pursuant to a contract with Mines. Mines, in turn, contracts with its students to provide them food (the food obtained, prepared, and served by Sodexo) through different types of meal plans. The City of Golden (the City) taxes Sodexo for students' use of the meal plans. This, Sodexo maintains, violates the Colorado Constitution and the Golden Municipal Code (2015) (Code or GMC).[1]

         ¶ 2 The district court disagreed with Sodexo and granted summary judgment for the City on Sodexo's challenges to the City's assessment and denial of refunds, leading to this appeal. Departing from the decision of another division of this court in City of Golden v. Aramark Educational Services, LLC, 2013 COA 45, involving a similar arrangement, we hold that, under the relevant contract and pursuant to the plain language of the Code, no sales occur between Sodexo and Mines' students with meal plans. Instead, Sodexo sells meal plan meals to Mines at wholesale. And since the Code expressly exempts wholesale sales from taxation, the City's assessment is invalid. We therefore reverse the district court's summary judgment and remand the case for entry of judgment in Sodexo's favor.

         I. Background

         ¶ 3 The contract between Sodexo and Mines requires Sodexo to "provide food services for [Mines] students, faculty, staff, employees and invited guests." It defines food services as "[t]he preparation, service and sale of food, beverages, and select goods, merchandise and other items to be agreed upon by [Mines] and Sodexo . . ., including catering, concessions, retail and meal plans." But the contract also says that the food and other tangible items Sodexo provides are deemed Mines' property alone; Sodexo is essentially Mines' go-between for that food.

         ¶ 4 Sodexo provides food services by operating and staffing all of the dining facilities on Mines' campus, both traditional residential dining facilities and "branded" dining facilities, including the Slate Cafe, Diggers' Den Food Court, Subway, and Einstein Bros. Bagels. A student buying a meal plan from Mines (pursuant to a contract with Mines, as explained below) can redeem her meal plan meals at any of these facilities. The facilities aren't advertised to the public and are used primarily by Mines' students and staff. On rare occasion, members of the public buy food from the facilities using cash or a credit card.

         ¶ 5 Sodexo's contract with Mines sets the prices Mines pays Sodexo for each meal that a student redeems pursuant to a meal plan the student has purchased from Mines. It also stipulates that any increase or decrease in these prices requires Mines' prior approval.

         ¶ 6 Mines requires every student living in a residence hall to select a meal plan from among several options; students living off-campus may purchase meal plans. Each meal plan includes a certain number of weekly meals and a sum of "Munch Money, " a declining balance of points/dollars that can be used at any retail food location on campus. At the end of each semester, students lose any unused balance of meals and Munch Money. These terms are memorialized in contracts that Mines enters into with its students; Sodexo doesn't enter into any food purchase contracts with Mines' students.

         ¶ 7 The students' contracts describe the available meal plan options and how much they cost. Mines alone determines prices and terms, without Sodexo's approval, and charges the cost of the meal plans to the students' Mines accounts. Only Mines can charge and collect amounts owed for meal plans.

         ¶ 8 Students redeem meal plan meals and Munch Money using "BlasterCards" provided by Mines. Mines electronically syncs each student's BlasterCard with the meal plan the student has purchased from Mines. So each time a student "swipes" her BlasterCard on a card reader at a dining facility, Mines' software automatically deducts a meal (or Munch Money) from the student's account.

         ¶ 9 Periodically, Mines reports the number of meals used under each of its meal plans to Sodexo.[2] Sodexo then invoices Mines based on the report. The per meal prices Mines pays Sodexo per their contract are significantly less than the prices Mines charges students under the meal plans.

         ¶ 10 The Code says the City may levy a three percent sales tax on the "purchase price" of "all sales of tangible personal property and services, " including food, unless expressly exempted. GMC § 3.03.010. Sodexo collects and remits sales tax on campus food purchases made with cash, check, or credit card.[3] But the City has also assessed Sodexo sales tax on transactions whereby students swipe their BlasterCards in exchange for meal plan meals in the dining facilities. (Paradoxically, however, the City assesses the tax based on the prices Mines pays Sodexo, not on the prices students pay Mines.[4]) As noted, Sodexo's challenges to this assessment have thus far failed.

         II. Discussion

         ¶ 11 Sodexo contends that the City can't tax it for meals purchased by Mines' students under the students' contracts with Mines because (1) doing so interferes with Mines' constitutional authority to exercise "exclusive control and direction" of its funds and appropriations; (2) doing so unconstitutionally taxes Mines' students' acquisition of education furnished by the State; (3) Sodexo's sales of food to Mines under their contract are excluded from taxation under the Code as direct sales to Mines in its governmental capacity only; and (4) Sodexo does not sell food to students at retail, but instead sells food to Mines at wholesale, and the Code expressly exempts wholesale sales from taxation. Because we conclude that Sodexo doesn't sell food to students at retail, and that the Code's wholesale exemption applies to the sales Sodexo makes to Mines, we don't address Sodexo's first three contentions.[5]

         A. Standard of Review and Applicable Law

         ¶ 12 We review an order granting summary judgment de novo. Hamon Contractors, Inc. v. Carter & Burgess, Inc., 229 P.3d 282, 290 (Colo.App. 2009). We similarly review the interpretation of a municipal ordinance. See Friends of Denver Parks, Inc. v. City & Cty. of Denver, 2013 COA 177, ¶ 45; Leggett & Platt, Inc. v. Ostrom, 251 P.3d 1135, ...

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