Tax Type
Retail Sales and Use Tax
Description
Food purchases by schools and state agencies
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
04-07-2000
April 7, 2000
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This will reply to your letter in which you seek correction of a retail sales and use tax audit assessment issued to your client, ***** (the "Taxpayer"), for the period of October 1995 through September 1998. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is a nonprofit state institution of learning. As a result of the department's retail sales and use tax audit, the Taxpayer was assessed tax on non-cash food sales to interdepartmental divisions. The food and meals in question are prepared by the Taxpayer's cafeteria and served at no charge to board members, administrators, doctors and other staff members during meetings, training sessions and other activities sponsored by the Taxpayer. The Taxpayer's records show the transactions as interdivisional sales. All food at issue is purchased exempt from the tax under a resale exemption certificate.
The Taxpayer maintains that food sales to interdepartmental divisions are exempt under Code of Virginia § 58.1-609.1(4), which provides an exemption for "tangible personal property for use or consumption by the Commonwealth [or] any political subdivision of the Commonwealth." In the alternative, the Taxpayer is requesting that non-cash food sales to interdepartmental divisions be exempt from the tax in accordance with the 1997 law change enacted by the 1997 General Assembly (Code of Virginia §58.1-609.4(2)(i)).
Should the department determine that any portion of the audit assessment be upheld, the Taxpayer requests that all penalties associated with the upheld portion of the audit be abated. This request is based on the Taxpayer's previous audit payment under protest and their belief that the department would revisit the issue.
DETERMINATION
General Policy
Code of Virginia § 58.1-609.1(4) provides a sales and use tax exemption for "tangible personal property for use or consumption by the Commonwealth [or] any political subdivision of the Commonwealth." Title 23 of the Virginia Administrative Code (VAC) 10-210-690, copy enclosed, addresses sales to the Commonwealth of Virginia and states, in part, "charges for meals, catered events, lodging, and other accommodations,... are subject to the tax when paid for by the state... or public institution of learning,... regardless of whether the purchases are made pursuant to required official purchase order." (Emphasis added).
Under longstanding Virginia case law, exemptions from the tax are to be strictly construed, with any doubt resolved against the taxpayer claiming the exemption. The Attorney General's opinion (ATT'Y GEN. ANN. REP.: 1969-1970 at 291) concluded that state government agencies do not enjoy an exemption for the sale tax when purchasing meals. This position was upheld by the Tax Commissioner's determination to the Taxpayer dated April 8,1996 (P.D. 96-41), copy enclosed.
Purchases made July 1, 1997, or after
As noted in your letter, Code of Virginia § 58.1-609.2(i) was amended by the 1997 General Assembly to exempt from the retail sales and use tax "food purchased for free distribution at the facilities of the college or other institution of learning," provided such college or other institution of learning is a nonprofit entity. Based on this law change and the facts of this case, l will agree to remove from the audit assessment all food provided free of charge for the period of July 1997 through September 1998.
Penalty
Based upon the circumstances outlined in your letter, and under the authority granted the Tax Commissioner by Code of Virginia §58.1-105, I will agree to waive all penalties assessed in this audit.
Summary
Based on all of the above, the audit will be adjusted to remove tax assessed on food purchased on or after July 1, 1997. In addition, the assessed penalty will be abated. In all other respects, the audit is correct. A revised audit assessment will be issued to the Taxpayer. The balance of tax and interest should be paid within 30 days of receipt of the revised assessment to avoid the accrual of additional interest.
If you should have any questions concerning this determination, please contact ****, Office of Tax Policy, at ****.
Sincerely,
Danny A. Payne
Tax Commissioner
OTP/20992K
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This will reply to your letter in which you seek correction of a retail sales and use tax audit assessment issued to your client, ***** (the "Taxpayer"), for the period of October 1995 through September 1998. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is a nonprofit state institution of learning. As a result of the department's retail sales and use tax audit, the Taxpayer was assessed tax on non-cash food sales to interdepartmental divisions. The food and meals in question are prepared by the Taxpayer's cafeteria and served at no charge to board members, administrators, doctors and other staff members during meetings, training sessions and other activities sponsored by the Taxpayer. The Taxpayer's records show the transactions as interdivisional sales. All food at issue is purchased exempt from the tax under a resale exemption certificate.
The Taxpayer maintains that food sales to interdepartmental divisions are exempt under Code of Virginia § 58.1-609.1(4), which provides an exemption for "tangible personal property for use or consumption by the Commonwealth [or] any political subdivision of the Commonwealth." In the alternative, the Taxpayer is requesting that non-cash food sales to interdepartmental divisions be exempt from the tax in accordance with the 1997 law change enacted by the 1997 General Assembly (Code of Virginia §58.1-609.4(2)(i)).
Should the department determine that any portion of the audit assessment be upheld, the Taxpayer requests that all penalties associated with the upheld portion of the audit be abated. This request is based on the Taxpayer's previous audit payment under protest and their belief that the department would revisit the issue.
DETERMINATION
General Policy
Code of Virginia § 58.1-609.1(4) provides a sales and use tax exemption for "tangible personal property for use or consumption by the Commonwealth [or] any political subdivision of the Commonwealth." Title 23 of the Virginia Administrative Code (VAC) 10-210-690, copy enclosed, addresses sales to the Commonwealth of Virginia and states, in part, "charges for meals, catered events, lodging, and other accommodations,... are subject to the tax when paid for by the state... or public institution of learning,... regardless of whether the purchases are made pursuant to required official purchase order." (Emphasis added).
Under longstanding Virginia case law, exemptions from the tax are to be strictly construed, with any doubt resolved against the taxpayer claiming the exemption. The Attorney General's opinion (ATT'Y GEN. ANN. REP.: 1969-1970 at 291) concluded that state government agencies do not enjoy an exemption for the sale tax when purchasing meals. This position was upheld by the Tax Commissioner's determination to the Taxpayer dated April 8,1996 (P.D. 96-41), copy enclosed.
Purchases made July 1, 1997, or after
As noted in your letter, Code of Virginia § 58.1-609.2(i) was amended by the 1997 General Assembly to exempt from the retail sales and use tax "food purchased for free distribution at the facilities of the college or other institution of learning," provided such college or other institution of learning is a nonprofit entity. Based on this law change and the facts of this case, l will agree to remove from the audit assessment all food provided free of charge for the period of July 1997 through September 1998.
Penalty
Based upon the circumstances outlined in your letter, and under the authority granted the Tax Commissioner by Code of Virginia §58.1-105, I will agree to waive all penalties assessed in this audit.
Summary
Based on all of the above, the audit will be adjusted to remove tax assessed on food purchased on or after July 1, 1997. In addition, the assessed penalty will be abated. In all other respects, the audit is correct. A revised audit assessment will be issued to the Taxpayer. The balance of tax and interest should be paid within 30 days of receipt of the revised assessment to avoid the accrual of additional interest.
If you should have any questions concerning this determination, please contact ****, Office of Tax Policy, at ****.
Sincerely,
Danny A. Payne
Tax Commissioner
OTP/20992K
Rulings of the Tax Commissioner