Tax Type
Retail Sales and Use Tax
Description
Catered Meals
Topic
Taxability of Persons and Transactions
Date Issued
01-12-1994
[Opinion - Virginia Attorney General: 1994 at 124]
REQUEST BY: The Honorable Richard L. Fisher Member, House of Delegates General Assembly Building 910 Capitol Street, Room 721 Richmond, Virginia 23219
OPINION BY: Steven D. Rosenthal, Attorney General
OPINION:
You ask whether a Virginia municipality that imposes a tax on meals may collect that tax on catered meals prepared in the municipality but delivered to and consumed in a jurisdiction in another state that also imposes a tax on such meals.
I. Applicable Constitutional and Statutory Provisions
Article I, § 8, clause 3 of the Constitution of the United States (the " commerce clause"), grants Congress the power "[t]o regulate commerce . . . among the several states."
Sections 58.1-600 through 58.1-639 of the Code of Virginia comprise the Virginia Retail Sales and Use Tax Act.
Section 58.1-3840 authorizes any city or town with general taxing powers to impose an excise tax on certain sales in addition to the general retail sales tax:
The provisions of Chapter 6 (§ 58.1-600 et. seq.) of this title to the contrary notwithstanding, any city or town having general taxing powers established by charter pursuant to or consistent with the provision of § 15.1-841 may impose excise taxes on cigarettes, admissions, transient room rentals, meals, and travel campgrounds. . . .
Section 58.1-3841 establishes the situs for imposition of a local meals tax:
- A. The situs for taxation for any tax levied on the sale of food and beverages or meals shall be the county, city, or town in which the sales are made, namely the locality in which each place of business is located without regard to the locality of delivery or possible use by the purchaser. . . .
B. If any person has a definite place of business or maintains an office in more than one locality, then such other locality may impose its tax on the sale of food and beverages or meals which are made by such person, provided the locality imposes a local tax on the sale of food and beverages or meals.
II. Commerce Clause May Prohibit Imposition of Locality's Meals Tax on Interstate Sale
Section 58.1-3841(A) is clear that sales by a catering operation with a place of business in a locality in the Commonwealth are subject to the locality's meals tax, regardless of whether the meals are delivered or consumed in another locality within the Commonwealth. See 1992 ATT'Y GEN. ANN. REP. 168, 171.§ 58.1-3841(A) thus resolves questions about which of two localities within Virginia may impose its meals tax if the sale and the delivery or consumption of the meal occur in different localities within the Commonwealth. Under § 58.1-3841, an intrastate sales transaction will not be subject to tax in more than one locality.§ 58.1-3841, however, does not resolve questions about the situs for the taxation of a meal if the sale occurs in Virginia and the delivery or consumption of the meal occurs in another state, that is, if the transaction is interstate.
No state statute expressly authorizes a Virginia locality to exempt the type of interstate transaction you describe or to give the seller a credit against the meals tax due in the Virginia locality for a similar tax paid in another state. The commerce clause of the federal constitution, however, generally prohibits a local tax that subjects interstate commerce to the risk of a double or multiple tax burden to which intrastate commerce is not exposed.1 McGoldrick v. Berwind-White Co., supra note 1, 309 U.S. at 45 (state taxation that tends to place interstate commerce at disadvantage as compared to intrastate commerce has unconstitutional regulatory effect on commerce between states); Gwin, etc., Inc. v. Henneford, 305 U.S. 434, 438-39 (1939) ( state taxation in any form prohibited if it discriminates against interstate commerce); see 1973-1974 ATT'Y GEN. ANN. REP. 374, 375.
Whether the commerce clause prohibits a tax on an interstate sales transaction depends on the circumstances of the particular transaction. Compare Harvester Co. v. Dept. of Treasury, 322 U.S. 340, 345-46 (1944) (sale within state to out-of-state buyers who transport goods out of state immediately upon delivery subject to state sales tax), with McLeod v. Dilworth Co., supra note 1, 322 U.S. at 329-30 (state without power to tax when title passed before delivery into taxing state). The exemptions and regulations adopted under the Virginia Retail Sales and Use Tax Act, §§ 58.1-600 through 58.1-639, are designed to prevent that tax from interfering with interstate commerce, in violation of the commerce clause. See 1987-1988 ATT'Y GEN. ANN. REP. 550, 551. Thus, such exemptions and regulations offer guidance to a locality in administering its meals tax within such constitutional limitations. See 1990 ATT'Y GEN. ANN. REP. 233, 234-35 (statutes dealing with same subject matter should, to extent possible, be read together).
Section 58.1-3840 authorizes a town tax on the "sale" of meals. For purposes of the general retail sales tax, § 58.1-602 defines "sale" to include "any transfer of title or possession . . . by any means whatsoever, of any tangible personal property."§ 58.1-609.10(4), however, exempts from the general retail sales tax those transactions in which tangible personal property is delivered "outside the Commonwealth for use or consumption outside of the Commonwealth." The purpose of this exemption is to avoid possible constitutional problems in the taxation of interstate sales. See Commonwealth v. Miller-Morton, 220 Va. 852, 858, 263 S.E.2d 413, 418 (1980).
Under this statutory exemption and the authority granted by § 58.1-203,2 the Tax Commissioner has issued sales and use tax regulation § 630-10-51, which provides that no "sale" occurs in Virginia if the seller transfers neither title nor possession in the Commonwealth but rather places the goods in interstate commerce for delivery outside of the Commonwealth. Va. Dep't of Tax'n. Va. Retail Sales & Use Tax Reg. ("Sales Tax Regulations") (Jan. 1, 1985); see also 1987-1988 ATT'Y GEN. ANN. REP., supra, at 552.
Under § 630-10-51 of the Sales Tax Regulations, therefore, the general retail sales tax does not apply to sales of tangible personal property if the property is placed in interstate commerce for delivery to the purchaser. See 1991 ATT'Y GEN. ANN. REP. 274, 275. Examples included in this regulation include sales when the property (1) is "delivered to the purchaser outside of the state in the seller's vehicle;" (2) is "delivered to the purchaser outside of the state by an independent trucker or contract carrier hired by the seller;" or (3) is "delivered by the seller to a common carrier or to the U.S. Post Office for delivery to the purchaser outside of the state."3 Sales Tax Reg. § 630-20-51(A)(1)-(3).
If the interstate transaction about which you inquire fits within any of the examples provided in this general retail sales tax regulation, so that it is exempt from that tax, in my opinion, a Virginia locality also should exempt that transaction from its local meals tax to avoid any possible commerce clause violation.4
1 The commerce clause does not prohibit per se the imposition of a local sales tax on transactions that affect interstate commerce and does not prohibit the taxation of a sale merely because the goods are delivered out of state. See McLeod v. Dilworth Co., 322 U.S. 327, 329-30 (1944) (sale takes place in state where order received by phone or mail and from which goods are shipped out of state); McGoldrick v. Berwind-White Co., 309 U.S. 33, 46 (1940) (not purpose of commerce clause to relieve those engaged in interstate commerce of their just share of state tax burden).
2 Under § 58.1-203, the Tax Commissioner is empowered to issue regulations relating to the interpretation and enforcement of all taxes administered by the Department of Taxation.
3 Also not subject to the general retail sales tax are purchases "for resale and immediate transportation out of the state by a dealer properly registered in another state." Sales Tax Reg. § 630-10-51(A)(4).
4 If the goods are not "placed in interstate commerce" before title or possession passes to the purchaser in the Virginia locality (e.g., if the purchaser takes possession of the goods in the Virginia locality and subsequently delivers them for use outside of the state in his own vehicle), the subsequent delivery of the goods outside of the state will not render the transaction nontaxable in the Virginia locality. See Commonwealth v. Miller-Morton, supra Pt. II, 220 Va. at 858, 263 S.E.2d at 418; Commonwealth v. Pounding Mill Quarry, 215 Va. 647, 651-52, 212 S.E.2d 428, 431 (1975). In such instances, the taxable event, the sale, clearly occurs in the locality. I express no opinion about whether the out-of-state locality also could tax the meals in such instances, but note that such other jurisdictions would have the same obligation as Virginia localities to avoid unconstitutional double taxation of interstate transactions.
Attorney General's Opinion