Tax Type
Retail Sales and Use Tax
Description
Menu boards/billboards.
Topic
Appropriateness of Audit Methodology
Collection of Tax
Documents Subject to Tax
Date Issued
06-26-2002
June 26, 2002
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter requesting correction of the retail sales and use tax assessment issued to ***** (the "Taxpayer") as a result of an audit. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer operates fast food restaurants. An audit for the period April 1999 through August 2001 resulted in the assessment of use tax on untaxed purchases of tangible personal property.
The Taxpayer disputes the tax assessed on the cost of menu boards. According to the Taxpayer, these menu boards have large photographs displaying its signature items without pricing attached. These menu boards also feature a minimum of nine short-term specials throughout the year. The Taxpayer maintains that menu boards are for exempt media advertising because the boards are the sole form of notifying customers about specials and are considered by the Taxpayer as part of its marketing effort.
DETERMINATION
Code of Virginia § 58.1-609.6(5) exempts from the sales and use tax charges for "advertising" as defined in Code of Virginia § 58.1-602 as:
-
- the planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting and other media, including, without limitation, the providing of concept, writing, graphic design, mechanical art, photography and production supervision. (Emphasis added.) The term "media" applies to newspapers, magazines, billboards, direct mail, radio, television, and other modes of mass communication.
The department's longstanding policy has been that modes of communication that disseminate information to the general public qualify as exempt media advertising. However, the advertising exemption does not extend to items used in a nonmedia promotional capacity.
In Public Document 97-265 (6/12/97), the Tax Commissioner determined that menus are generally not used in exempt media advertising. Rather, menus are normally used by a restaurant when serving its customers within the restaurant.
In the instant case, I find that the menu boards are more analogous to taxable menus than to exempt billboards. The menu boards at issue are exterior signage directed at walk-up and drive-up customers to inform them of the Taxpayer's food service. The menu boards are clearly aimed at aiding customers in menu selection for ordering food while at the Taxpayer's restaurants and are analogous to taxable menus used by restaurants. The significance of the menu boards is limited primarily to customers while on the restaurant property. Accordingly, they are not analogous to billboards (which are used to advertise to the public at large, generally along a public roadside). Regardless of whether prices are listed, the menu boards in this case do not constitute the purchase of exempt media advertising as envisioned by Code of Virginia § 58.1-609.6(5) and Title 23 of the Virginia Administrative Code (VAC) 10-210-40 through 10-210-42.
As set out in 23 VAC 10-210-540, a doctrine of strict construction applies to sales and use tax exemptions. That is, when exemption language is susceptible of two constructions, the construction denying the exemption will be followed. Based on this doctrine of strict construction of sales and use tax exemptions and the information at issue in this case, the assessment is correct. A consolidated bill, with interest accrued to date, will shortly be mailed to the Taxpayer. No additional interest will accrue provided the outstanding assessment is paid within 45 days from the date of this letter.
The Code of Virginia, regulations and public documents cited are available online in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us. If you have any questions about this determination, you may contact ***** in the department's Office of Policy and Administration, Appeals and Rulings, at *****.
-
Sincerely,
Kenneth W. Thorson
Tax Commissioner
AR/38516R
Rulings of the Tax Commissioner