Tax Type
Retail Sales and Use Tax
Description
Dinner theatre package for accounting purposes
Topic
Appropriateness of Audit Methodology
Penalties and Interest
Date Issued
05-02-2002
May 2, 2002
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in reply to your letters in which you seek correction of the retail sales and use tax assessment issued to ***** (the "Taxpayer") for the periods October 1992 through June 1995 and July 1995 though May 1997. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is a hotel and conference center that operated a theatre. The Taxpayer sold tickets for (1) theatre admission only, and (2) dinner theatre packages in which the purchaser received both a meal and admission to the theatre. A single amount was charged for the dinner theatre package and, for accounting purposes, the Taxpayer allocated the proceeds between theatre revenue and dinner revenue. The Taxpayer then remitted the tax only on the dinner revenue portion of the sales price. Because it felt that the total dinner theatre package is taxable, the audit staff assessed tax on the theater revenue portion of the sales price.
You question the application of the tax to the total dinner theatre package and cite Public Document (P.D.) 85-167 (9/3/85) to support the Taxpayer's position. Further, if the assessment is upheld, the Taxpayer requests abatement of the tax because the issue was not raised in a prior audit. To support this position, you cite P.D. 98-33 (2/23/98).
DETERMINATION
Dinner Theatre Packages
Title 23 of the Virginia Administrative Code (VAC) 10-210-30 provides that the "tax does not apply to sales of tickets, fees, charges, or voluntary contributions for admissions to places of amusement, entertainment, [or] exhibition .... However, 'cover charges' or 'minimum charges' which include the provision of or the entitlement to food, drinks, or other tangible personal property constitute a sale of property and are subject to the tax." In addition, Title 23 VAC 10-210-930 provides that "retail sales of meals by restaurants, hotels, motels, clubs, caterers, cafes and others are taxable."
Although the sales tax does not apply to admissions, in this case the theatre admission is provided in addition to a taxable meal. Further, both the theatre admission and the meal are sold for a single charge. Code of Virginia § 58.1-602 defines "sales price" to mean the "total amount for which tangible personal property or services are sold ...." Based on the definition of "sales price," the total charge for the dinner theatre packages is taxable.
The contested transactions in this case are not analogous to those addressed in P.D. 85-167, on which you rely. The taxpayer in that prior determination sold dinner, theatre admission, or both. When selling both dinner and theatre admission, the taxpayer segregated the charges for dinner from the charges for theatre admission. By doing so, the taxpayer clearly and specifically identified for the customer the taxable dinner charge from the nontaxable theatre admission.
New Issue
In P.D. 98-33, a taxable transaction was removed from a sales and use tax audit assessment because the taxpayer in that case was relying on erroneous information provided during a prior audit. That condition is not at issue in this case.
I understand that the prior auditor reviewed the theatre revenue but saw no indication at that time that revenues also applied to dinner theatre packages. It was only in the current audit that the auditor found documents indicating that the Taxpayer sold the dinner theatre packages. Based on these circumstances, I do not find a basis to waive the tax on the dinner theatre packages. Because this represents a new issue, however, penalty was not assessed.
Summary
In accordance with this determination, the Taxpayer will receive an updated bill with interest accrued to date. No additional interest will accrue provided the bill is paid within 30 days of 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 regarding this determination, you may contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
AR/37406J
Rulings of the Tax Commissioner