Tax Type
Retail Sales and Use Tax
Description
Airline Carrier; Taxability of Food Related Items
Topic
Property Subject to Tax
Date Issued
08-08-2001
August 8, 2001
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****
This will reply to your letter in which you seek correction of the retail sales and use tax audit assessment issued to *****(the "Taxpayer") for the period of July 1996 through March 1999. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is an airline operating as a common carrier in interstate and foreign commerce. The Taxpayer was audited and assessed tax on dishes, silverware, and various other items purchased by the Taxpayer and used in providing its in-flight meal service. The Taxpayer believes these items are used directly in the rendition of its common carrier service and qualify for the retail sales and use tax exemption set forth in Code of Virginia § 58.1-609.3(6). The Taxpayer requests that the audit assessment be abated.
DETERMINATION
Code of Virginia § 58.1-609.3(6) sets forth the retail sales and use tax exemption afforded to airlines operating in interstate and foreign commerce and provides an exemption for the following:
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- Tangible personal property sold or leased to an airline operating in intrastate, interstate or foreign commerce as a common carrier providing scheduled air service on a continuing basis to one or more Virginia airports at least one day per week, for use or consumption by such airline directly in the rendition of its common carrier service. (Emphasis added).
Title 23 of the Virginia Administrative Code (VAC) 10-210-100 interprets the exemption statute and provides, in part, that meals, snacks and beverages furnished by an airline to passengers or others are not used or consumed by the airline directly in the rendition of its common carrier service. Therefore, such items are subject to the tax.
The department's policy with regard to airlines operating in interstate and foreign commerce is guided by the Virginia Supreme Court's decision in Commonwealth of Virginia v. United Airlines. Inc., 219 Va. 374, 248 S.E.2d 124 (1978) (hereinafter "United Airlines"). In United Airlines, the Virginia Supreme Court ruled that food and related items served to passengers during flights were considered amenities and an operating expense that is necessary in the competitive field of air transportation. The Virginia Supreme Court supported this position by finding that food and related items were not served on all flights, but only on flights that occurred during normal meal hours, and the airlines fares on identical flights were the same whether or not the provisions of a meal were included. Thus, food and related items are not considered essential items used immediately and principally by an airline operating in interstate commerce in the rendition of its common carrier function.
Based on all of the above, I find that the dishes, silverware and related items associated with the in-flight meals were correctly held taxable in the audit. If you should have any questions, please contact ***** Office of Tax Policy, at *****
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/26296K
Rulings of the Tax Commissioner