Tax Type
Retail Sales and Use Tax
Description
Caterer; tangible personal property use in the preparation & serving food
Topic
Property Subject to Tax
Taxable Transactions
Date Issued
12-30-2004
December 30, 2004
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in reply to your letter in which you request a ruling regarding the application of the retail sales and use tax to purchases made by ***** (the "Taxpayer"). I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is a catering business and questions the application of the tax to purchases of perishable goods and disposable items made in connection with the provision of catering services. The purchases in question are not reusable and transfer to the customer.
RULING
Current policy
Title 23 of the Virginia Administrative Code (VAC) 10-210-930 addresses the application of the tax to purchases by restaurants in connection with the provision of meals and provides in section F that "[p]aper doilies, paper placemats, plastic silverware, bags and similar items furnished with meals and which are disposed of after use by only one customer are also considered a part of a meal and can be purchased exempt under a Resale Certificate of Exemption." In addition, the regulation provides that "[o]ther items purchased by a restaurant for its own use in preparing and serving meals, such as kitchen equipment, plates, glasses, silverware, tablecloths, and similar items are taxable and may not be purchased under a Certificate of Exemption."
In applying the above regulation to caterers, the Department's established policy is that a caterer is the taxable consumer of all items and supplies used in connection with providing a meal, except that the food itself and related disposable items may be purchased under the resale exemption. Therefore, the Taxpayer may purchase for resale the food and disposable items that transfer to the customer and are not reusable.
The tax must be paid on all other purchases made in connection with the provision of catered food. The application of the tax to purchases by caterers is set out in a number of prior rulings of the Tax Commissioner, including Public Documents 89-187 (5/22/89) and 93-33 (2/24/93). In addition, Virginia Tax Bulletin 92-10 (11/4/92) discusses the application of the tax to providers of meals, including caterers.
Policy change
Effective January 1, 2005, the Department will change its policy regarding the application of the sales and use tax to certain purchases by caterers. Effective for purchases made on and after January 1, 2005, items intended to be transferred to the customer will no longer be taxable to the caterer, i.e., the caterer will not be required to pay tax at the time of purchase. Instead, items intended to be transferred to the customer may be purchased for resale by presenting a valid and complete resale certificate of exemption (Form ST-10). Items eligible to be purchased for resale include: party accessories, including invitations, favors and decorations, flowers and flower arrangements, ice sculptures and similar items. In addition, a caterer may rent for resale tables, chairs, tents, gazebos, arches, and similar equipment when such items are obtained on behalf of the customer and the charge for such rented items is passed on to the customer.
It is important to note that the caterer must document all purchases and rentals of the aforementioned items for resale purposes. The charges to the customer for such items must be separately stated on the invoice to the customer. It must be evident that the charges being incurred by the caterer for the customer are the same charges that are being passed on to the customer and on which tax is collected from the customer.
The caterer will continue to pay the tax on purchases of tangible personal property for its use in the preparation and serving of food as under the current policy. In addition, the caterer must pay the tax on purchases of reusable items.
The regulation, public documents and Tax Bulletin cited are available on-line in the Department's Tax Policy Library, located at www.policylibrary.tax.virginia.gov. If you have any questions regarding this ruling, you may contact ***** in the 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/50416J
Rulings of the Tax Commissioner