Tax Type
Retail Sales and Use Tax
Description
Tax on admission tickets sold with room accommodations package; tax on sod
Topic
Taxable Transactions
Date Issued
01-07-2008
January 7, 2008
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the "Taxpayer"), in which you seek correction of the retail sales and use tax assessment issued for the period November 2001 through February 2005. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is contesting the assessment of tax on amusement park tickets sold as part of a package with room accommodations and the assessment of tax on sod purchased and installed at the Taxpayer's golf course by an out-of-state landscaping contractor.
Admission Tickets
The transactions at issue are for vacation packages that are sold by an affiliated entity via the affiliate's website and through the affiliate's toll-free telephone number. The packages include the sale of admissions tickets to the affiliate's amusement parks and accommodations at one of 40 local hotels.
The Taxpayer represents that the affiliate enters into contracts with local hotels for the sale of hotel reservations. Pursuant to the contracts, the affiliate has the right to purchase hotel reservations and to sell the reservations to its customers. The Taxpayer collects the total price for the vacation package from the customers at the time of the booking. The Taxpayer remits to the hotel the amount collected less a commission for its services. The hotels are responsible for paying all applicable taxes on the sales of the hotel rooms. As an administrative convenience to the hotels and the customers, the Taxpayer represents that it collects the applicable taxes from the customer at the time of booking and remits those amounts to the hotels.
The Taxpayer is solely responsible for handling the admission ticket portion of the vacation package, and collects all payments from the customer for the tickets. The Taxpayer represents that it purchases the tickets from the affiliate and collects a small commission for the services it provides in selling the tickets. The Taxpayer contends that the auditor's assessment of the tax on the amusement park tickets is contrary to the regulation in Title 23 of the Virginia Administrative Code (VAC) 10-210-30, which states that the sales tax does not apply to sales of tickets for admission to places of amusement. The Taxpayer further maintains that for many years it has sold package deals that included admission tickets, and that it has never been assessed tax on these sales in Department audits.
Sod
The Taxpayer entered into a contract with an out-of-state landscaping contractor (the "contractor") in which the contractor agreed to provide various landscaping services. Under the agreement, the Taxpayer maintains that it agreed to pay a lump sump payment to the contractor, which included "all applicable sales and/or use taxes."
DETERMINATION
Admission Tickets
Title 23 VAC 10-210-730 C provides that "[a]ny additional charges made in connection with the rental of a room or other lodging or accommodations are deemed to be a part of the charge for the room and are subject to the tax. For example, additional charges for movies, local telephone calls and similar services are subject to the tax. Toll charges for long-distance telephone calls are not subject to the tax."
In Public Document (P.D.) 95-17 (2/2/95), the taxpayer was a hotel that sold golf packages to its customers. For a single charge, the taxpayer's customers received a hotel room, breakfast, a complimentary tee gift, and a round of golf at a local golf course. Based on the Va. Code § 58.1-602 definitions of sales price and gross proceeds, it was determined that "while green fees are not taxable in and of themselves, green fees (and other services) charged in connection with the taxpayer's golf packages were an integral element of the taxable lodging transaction and were taxable." The application of tax on green fees sold in connection with the taxpayer's accommodations was deemed correct.
The Taxpayer maintains that the transactions at issue represent two independent transactions - the sale of hotel reservations and the sale of admission tickets. Relying on LZM, Inc. v. Virginia Dept of Taxation, 269 Va. 105 (2005), the Taxpayer asserts that the sale of the admission tickets is not "inextricably connected" to the sale of the room reservations. The Taxpayer maintains that the actual sale of the hotel rooms is made by the hotels, and that it only sells hotel reservations.
In this instance, the Taxpayer was assessed tax on the sales of admission tickets in the audit when the Taxpayer sold room accommodations and admission tickets for a lump sum charge. The charges for the room accommodations are set by the participating hotels, and the charges for the admission tickets are set by the amusement parks. Title 23 VAC 10-210-730 provides that the sales tax is applicable to "any additional charges made in connection with the rental of a room." However, the charges for admission tickets in this instance are not the types of additional charges contemplated by this regulation. Additionally, this situation is distinguishable from that in P.D. 95-17. In that determination, greens fees sold in connection with room accommodations, for a lump sum charge, were deemed taxable and an integral element of the taxable lodging transaction. In this instance, the admission tickets are not an integral element of the taxable transaction because the rates for the accommodations and the admission tickets are set independently from one another. Accordingly, the charges for the admission tickets are not taxable. The audit will be returned to the audit staff, and the charges will be removed from the audit assessment.
Further, in P.D. 04-135, the taxpayer sold hotel accommodations and admission tickets to local attractions. The taxpayer was assessed tax in the audit on the admission tickets charges. On appeal, it was determined that the taxpayer was not liable for the tax because a separate charge for the tickets was made from the charge for the hotel accommodations. In the Taxpayer's case, to avoid future audit issues related to transactions of this type, the Taxpayer should separately state the charge associated with the sale of the admission tickets and the charge associated with the sale of the room accommodations on the documents given to its customers.
Sod
In this instance, the Taxpayer contracted for the installation of sod at its golf course. The sod was purchased by the landscape contractor from an out-of-state vendor. The vendor billed the landscape contractor and shipped the sod to the Taxpayer. The vendor charged the landscape contractor 5% sales tax on the purchase. The vendor is a registered Virginia dealer. Based on these facts, the Taxpayer is not liable for the sales tax on the purchase of the sod. Accordingly, the sod purchases will be removed from the audit.
CONCLUSION
The audit will be returned to the audit staff to make the aforementioned adjustments. Once the adjustments are made, a consolidated bill, with interest accrued to date, will be mailed to the Taxpayer. To avoid the accrual of additional interest, the Taxpayer should remit payment to the Department within 30 days from the date of the bill.
The Code of Virginia sections, regulation and public document cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this determination, 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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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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AR/1-797507801P
Rulings of the Tax Commissioner