Tax Type
Retail Sales and Use Tax
Description
Taxed on the lumpsum charge for equestrian packages that include meals and lodging
Topic
Collection of Tax
Property Subject to Tax
Taxable Transactions
Date Issued
06-18-2008
June 18, 2008
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter and recent conversation with a member of the Appeals and Rulings staff in which you seek correction of the retail sales and use tax assessment issued to ***** (the "Taxpayer") for the period January 2003 through May 2006. I note that the Taxpayer has paid the assessment in full. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer operates an equestrian retreat that offers daily equestrian excursions and overnight packages that include accommodations, meals, horseback riding, and other activities. The Taxpayer was audited and assessed tax on the lumpsum charge for equestrian packages that include meals and lodging.
The Taxpayer contests the tax and contends that it provides a horseback riding service. Unlike hotels, the Taxpayer states that it is not in the business of soliciting overnight accommodations. Rather, it offers overnight packages as a convenience to customers that want a few days of horseback riding. In addition, the Taxpayer claims that it paid the sales tax on restaurant meals and grocery items provided to guests in connection with the equestrian packages at issue. Therefore, the Taxpayer contends that the assessment is overstated.
DETERMINATION
Equestrian PackagesVirginia Code § 58.1-609.5 1 provides an exemption from the retail sales and use tax for "[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made . . . ." In order to determine whether a particular transaction which involves both the rendering of a service and the provision of tangible personal property constitutes an exempt service or a taxable retail sale, the "true object" of the transaction must be examined. Title 23 of the Virginia Administrative Code (VAC) 10-210-4040 D states, "If the object of the transaction is to secure a service and the tangible personal property which is transferred to the customer is not critical to the transaction, then the transaction may constitute an exempt service."
Based on the facts in this case, the customer seeks the Taxpayer's provision of horseback riding. The true object of the transaction, in this instance, is the provision of a service. The Taxpayer is deemed to provide a nontaxable service and is not required to collect the tax on the equestrian packages. Accordingly, the tax assessed to the sale of equestrian packages will be removed from the assessment.
Title 23 VAC 10-210-4040 E states that service providers are the taxable users and consumers of all tangible personal property purchased for use in providing exempt services. As a service provider, the Taxpayer is considered the user and consumer of all tangible personal property and services purchased for use in providing the exempt equestrian services. The Taxpayer was correct to pay the tax on the purchase of food used to prepare meals served to customers. In addition, the Taxpayer correctly paid the tax to restaurants that provided meals in connection with the equestrian packages.
This determination is consistent with Public Document 89-253 (9/21/89). In that case, the taxpayer sold hunting packages that included access to the reserve, meals and lodging. The Tax Commissioner ruled that the total charge for the hunting package represented the charge for a nontaxable service. As such, the taxpayer was instructed to pay the tax on all purchases, including lodging and restaurant meals, provided to guests in connection with the hunting packages.
Future Compliance
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- It is my understanding that the Taxpayer changed its billing practices as a result
CONCLUSION
In accordance with this determination, the Taxpayer will receive a revised audit report and a refund of the tax paid in regard to the equestrian packages addressed in this letter. The refund will include interest accrued from the date of payment of the tax.
The Code of Virginia section, regulation and public document 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 questions regarding this determination, you may contact *****.
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- Sincerely,
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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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AR/1-1100969760.T
Rulings of the Tax Commissioner