Tax Type
Retail Sales and Use Tax
Description
Price listings should indicate that the sales tax is included in the price of each item
Topic
Clarification
Collection of Tax
Computation of Tax
Date Issued
01-15-2007
January 15, 2007
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in reply to your letter regarding ***** (the "Taxpayer"), in which you request permission to include the sales tax on sales made at a pool side cabana during the summer season.
Virginia Code § 58.1-625 requires a dealer to separately state the amount of the tax and add the tax to the sales price or charge. Title 23 of the Virginia Administrative Code 10-210-340 A provides additional guidance on the statutory requirement, explaining "[i]dentification of the tax by a separate writing or symbol is not required provided that the amount of the tax is shown as a separate item on the record of the transaction."
Virginia law allows the inclusion of the sales tax within the selling price only in very limited situations. Virginia Code § 58.1-614 D provides that when a dealer is able to demonstrate to the satisfaction of the Tax Commissioner that it is impractical to collect the tax in accordance with the bracket system provided for in Va. Code § 58.1-628, the taxpayer may be authorized to remit an amount based on a percentage of gross receipts that takes into account the inclusion of the sales tax. In the Taxpayer's situation, the costs associated with establishing a point of sale system in an outdoor setting outweigh the savings realized in establishing a tax inclusive pricing venue for guests who would be served more conveniently and quickly.
Based on the Taxpayer's discussion with a member of my staff and under the provisions set forth in Va. Code § 58.1-614 D, permission is granted for the Taxpayer to include the sales tax in its cabana prices beginning May 1, 2007. This permission does not need to be requested annually and applies only to the retail sales tax. The Taxpayer's price listings and signs advertising the items for sale should indicate that the sales tax is included in the price of each item.
Based on the current sales and use tax rate of 5%, the Taxpayer should divide the total receipts for the period, inclusive of the sales tax collected, by a factor of 1.05 to derive the amount of sales tax that must be remitted to the Department.
The Taxpayer must seek separate permission from its locality to include the local meal and beverage tax in any menu item prices.
The Code of Virginia sections and regulation cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have any additional questions, please contact ***** of the Department's 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/1-877771858Q
Rulings of the Tax Commissioner