Tax Type
Retail Sales and Use Tax
Description
Food Tax Reduction Program; bottled drinking water is an "accessory food"
Topic
Classification
Payment and Refund
Rate of Tax
Date Issued
09-29-2006
September 29, 2006
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This will reply to your letter in which you seek information on the application of the Virginia retail sales and use tax to purified bottled drinking water sold to Virginia customers.
You represent that ***** (the "Company") manufactures and distributes purified bottled drinking water and related water products to residential customers and businesses in Virginia. The Company is a registered dealer in Virginia and currently charges 5 percent sales tax on the sale of bottled water and related water accessories to Virginia customers. You recently contacted the Department and were advised that the sale of bottled water by the case qualifies for the 2½ percent reduced tax rate on food purchased for human consumption. You question whether the sale of five gallon and smaller bottles of water dispensed from water coolers qualifies for the reduced sales tax rate when sold to Virginia residential and business customers.
The Food Tax Reduction Program set out in Va. Code § 58.1-611.1 applies a reduced tax rate to sales of food purchased for human consumption as defined under the Food Stamp Act of 1977, 7 U.S.C. § 2012. The reduced tax rate applies regardless of whether the food is sold to an individual or a business. Effective July 1, 2005, the reduced tax rate on food for human consumption is 2½ percent.
Virginia Tax Bulletin 05-07 (5/31/05) discusses in detail foods that qualify for the reduced sales tax rate. The Tax Bulletin states that bottled drinking water (including spring, purified and sterilized) is considered an "accessory food" item qualifying for the reduced sales tax rate. While not specified in the Tax Bulletin, bottled water also includes filtered, carbonated, non-carbonated, non-flavored and mineral waters.
In regard to the container sizes, this is not a factor in determining the application of the sales tax to bottled water sold in Virginia. Thus, bottled water dispensed from a water cooler and sold by a distributor to business or residential customers in Virginia is considered food for human consumption and qualifies for the reduced sales tax rate.
In this case, the Company collected tax on bottled water at the 5 percent retail sales tax rate. If the Company would like to request a refund of the portion of the tax erroneously collected (the amount in excess of the reduced tax rate), it must refund to its customers the excess tax collected on the bottled water. For the month the refund is made to its customers, the Company may claim a credit on its retail sales and use tax return for the amount of the refund. The refund request must be made within three years of the due date of the return. See Title 23 of the Virginia Administrative Code 10-210-3040.
The Code of Virginia section, regulation and the Tax Bulletin cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department of Taxation's web site. If you have any questions about this ruling or the refund procedure, you may contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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AR/1-635194456T
Rulings of the Tax Commissioner