Composite hotel lodging service: meals to resident guests were incidental to stay and not a separate taxable sale.

Meals served to a resident hotel guest under an indivisible lodging arrangement were not treated as a separate sale of food-stuffs. The Court applied the test that a sale requires an intention to transfer property in goods as goods, whereas a service contract remains one of work or service even if materials are incidentally supplied. Because the hotel stay was a composite service and the bill did not separately identify lodging and food charges, no real intention to buy and sell the meals could be inferred. The supply of meals was therefore not liable to sales tax.

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Issues: Whether meals served by a hotel to a resident guest, as part of the lodging arrangement and under one indivisible bill, constitute a sale of food-stuffs liable to sales tax.

Analysis: The decisive inquiry was the true nature of the transaction. A contract of sale requires an intention to transfer property in goods as goods, whereas a contract of service remains one for work or service even if some materials pass incidentally in the course of performance. The lodging arrangement in a hotel was found to be a composite but indivisible service transaction in which meals, like other amenities, were supplied only as incidents of the guest's stay. The bill was not separately split into lodging and food charges, and no realistic intention to sell and purchase the food served at mealtimes could be spelt out from the arrangement.

Conclusion: The supply of meals to resident hotel guests was not a separate sale of food-stuffs and was not liable to sales tax.

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