Tax Type
Retail Sales and Use Tax
Description
A Cooperative is engaged in retail sales through the operation of its dining facilities.
Topic
Credits
Exemptions
Date Issued
10-29-2004
October 29, 2004
Re: Request for Ruling: Retail Sales and Use Tax
Dear *******************:
This will reply to your letter in which you request a ruling on the application of the retail sales and use tax to the monthly contribution for food paid by the residents of the ************* (the "Taxpayer").
FACTS
The Taxpayer operates a cooperative in which the residents are owners of a proprietary interest in an individual living unit. Each resident of the cooperative contributes an established amount each month to the cooperative to provide for security, cable, maintenance, ground maintenance, housekeeping, water, electricity, and other essential amenities. In addition to the established amount for the above-mentioned amenities, each resident also contributes an established amount for food and beverage service, referred to as a monthly meal credit in the Taxpayer's Public Offering Statement.
The monthly meal credit is assessed per resident and is based on the type of housing the individual owns. The cooperative operates two facilities for food service and provides meals only to residents and their guests. Meals served to guests are billed to the cooperative residents. In the event the resident consumes meals in excess of his or her monthly meal credit, the resident is responsible for the overage.
You request a ruling on the application of the retail sales and use tax to the monthly meal credit, as well as the overage contributed by each resident of the cooperative.
RULING
Title 23 of the Virginia Administrative Code 10-210-930 states that "retail sales of meals by restaurants, hotels, motels, clubs, caterers, cafes and others are taxable. Cover, minimum and room service charges in connection with the provision of meals are a part of the sales price and are taxable." Based on the above regulation, the cooperative is engaged in retail sales through the operation of its dining facilities.
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- Notwithstanding the above, Virginia Code § 55-428 F states:
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- Any residential cooperative association, the members of which are owners of cooperative interests in a cooperative under this chapter, shall not be deemed to be a business for any state and local purposes, including, but not limited to, liability for payment of sales, meals, hotel, motel and gross receipts taxes and business taxes, to the extent that it collects payments from residents of the cooperative. The provisions of this subsection are declaratory of existing law.
Virginia Code § 55-428 F exempts residential cooperative associations from state and local taxes on payments the cooperative collects from its residents. The statute applies to the Taxpayer's cooperative association in that the members or residents are owners of a proprietary interest in the cooperative.
Applying the facts presented to the statute and regulation cited above, the Taxpayer should not collect sales tax from its residents for the meal credit. Pursuant to Va. Code § 55-428 F, the Taxpayer is not a business for purposes of the meal credit (i.e., a form of payment) collected from residents of the cooperative. The Taxpayer must continue to pay the retail sales tax or use tax for food, beverages and other food service items purchased from its vendors.
This response is based on the facts provided as summarized above. Any change in the facts or the introduction of new facts may lead to a different result.
The Code of Virginia sections cited, along with other reference documents, are available on-line in the Tax Policy Library section of the Department of Taxation's website, located at www.tax.state.va.us. If you have any questions about this response, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
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AR/52510i
Rulings of the Tax Commissioner