Tax Type
Retail Sales and Use Tax
Description
Caterer; Non separately stated labor charges subject to sales tax
Topic
Persons Subject to Tax
Taxability of Persons and Transactions
Date Issued
12-21-2001
December 21, 2001
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****
This is in reply to your letter in which you seek correction of the sales and use tax assessment issued to ***** (the "Taxpayer"), for the period May 1997 through March 2000. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer operates a catering business and was assessed tax on charges for labor associated with bartenders and waiters provided in conjunction with catered food. The Taxpayer disagrees with the tax and believes the charges represent exempt labor. The Taxpayer takes exception to the department's Public Document (P.D.) 93-33 (2/24/93), which applies the tax to labor charges billed by caterers for personnel services.
In addition, the Taxpayer requests that the Tax Commissioner provide an explanation of procedures for obtaining a bond prior to making an application to the court for correction of the assessment.
DETERMINATION
Catering Services
The Taxpayer believes caterers are treated differently than other industries with regard to charges for labor. For example, the Taxpayer notes that labor charges billed by an automotive repair shop in connection with a brake job are exempt in accordance with Title 23 of the Virginia Administrative Code (VAC) 10-210-4040. The Taxpayer contends that applying the tax to separately stated labor charges billed by caterers in connection with the sale of catered food is discriminatory.
The cited regulation provides that "separately stated labor or service charges for the repair, installation, application or remodeling of tangible personal property" are exempt services. This regulation conforms to Code of Virginia § 58.1-609.5(2), copy enclosed, which exempts from sales and use taxation the "amount separately charged for labor or services rendered in installing, applying, remodeling or repairing property sold." Therefore, separately stated labor charges billed in connection with the repair of automotive brakes (tangible personal property) are exempt by statute.
Conversely, the labor charges billed by the Taxpayer are not in connection with the repair, installation, application or remodeling of tangible personal property. In this regard, the regulation provides that the tax applies to "any services in connection with the furnishing, preparing, or serving by a person for a consideration of meals or other tangible personal property ...." Therefore, the charges billed by the Taxpayer for services provided by bartenders and waiters represent services provided in connection with catered food and are taxable in accordance with the regulation.
Further, Code of Virginia § 58.1-602 defines "sales price" to mean the "total amount for which tangible personal property or services are sold, including any services that are a part of the sale ...without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expenses whatsoever." (Emphasis added.) In accordance with the definition of "sales price," the Taxpayer is required to charge the sales tax on the total charges billed, including all charges for services provided in connection with catered food.
The application of the tax to labor charges billed by caterers for personnel services is set out in a number of prior departmental rulings, including P.D. 93-33. I am enclosing P.D. 88-147 (6/20/88), P.D. 89-167 (5/22/89), and P.D. 00-139 (7/31/00) for your information.
Bond Procedures
Code of Virginia § 58.1-1825 provides that any person assessed with any tax administered by the department may apply to the circuit court for relief. The application to the court is considered filed when (i) the assessment has been paid or (ii) in lieu of payment, the taxpayer has posted bond pursuant to the provisions of § 16.1-107, with a corporate surety licensed to do business in Virginia, within ninety days from the date of the assessment.
The matter of posting a bond is under the purview of the circuit court which has jurisdiction over the tax assessment. Generally, this means the circuit court in the locality where the taxpayer conducts business. In the case of out-of-state taxpayers, tax cases are generally heard by the Circuit Court of the City of Richmond. In either case, the procedures for posting a bond are administered and governed by the circuit court and not by the department. Therefore, any taxpayer desiring to post a bond in connection with an application to the court for correction of an assessment issued by the department must contact the appropriate court for procedural information.
Conclusion
The department's assessment is correct and is due and payable. The Taxpayer will receive shortly an updated bill including accrued interest. The bill must be paid within 30 days of the bill date to avoid the accrual of additional interest charges. If you have questions concerning this letter, you may contact ***** Office of Policy and Administration, Appeals and Rulings, at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
AR/29729J
TO WHOM IT MAY CONCERN
Under the authority of Section 58.1-1 of the Code of Virginia, I hereby delegate to Janie E. Bowen, Assistant Tax Commissioner, the authority to sign for me any and all documents, including, but not limited to, affidavits, warrants, rulings, appeals, offers in compromise and sales tax revocations.
This authority shall not extend to matters or documents related to my service on any statutorily created board or commission, including, but not limited to, the Compensation Board and the Treasury Board.
This authority will continue until revoked. The delegation of authority dated June 3, 1994, is hereby revoked and replaced.
Done at Richmond, Virginia this tenth day of September, 1999.
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner