Tax Type
Retail Sales and Use Tax
Description
Tax on green fees that are part of the golf packages.
Topic
Appropriateness of Audit Methodology
Penalties
Date Issued
05-02-2012
May 2, 2012
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This will reply to your letter in which you seek correction of the retail sales and use tax assessment issued to ***** (the "Taxpayer") for the audit period August 2008 through August 2011.
FACTS
The Taxpayer owns and operates a museum and gift shop. The Taxpayer also handles the sale of accommodation packages that include meals, attractions and golf. The Department's audit resulted in an assessment for untaxed sales and purchases. While the Taxpayer is in agreement with a majority of the assessment, the Taxpayer disagrees with the assessment of tax on green fees that are part of the golf packages.
The Taxpayer states that since it began its business, it has applied the tax on all facets of its package sales with the exception of green fees. The Taxpayer states that its internal documentation reflects this fact. The Taxpayer represents it has started to apply the tax to green fees included in package sales. The Taxpayer asks that the Department waive the tax and interest assessed on green fees for the current audit period. The basis for its request is that in previous audits by the Department, the Taxpayer was not made aware that the packaged green fees were subject to the tax. The Taxpayer also requests a waiver of the assessed penalties.
DETERMINATION
Green Fees
The Department has previously ruled that packages offered by hotels, motels, inns, etc., that include a single charge for accommodations and other services or tangible personal property are subject to the tax on the total charge for the package. In Public Document (P.D.) 95-17 (2/2/95), a hotel offered a package to customers that included a hotel room, breakfast, a round of golf and a complimentary tee gift. The hotel did not charge guests sales tax on the golf green fee portion of the package. The Department ruled that the entire charge was subject to the tax based on the definitions of "sales price" and "gross proceeds" found in Va. Code § 58.1-602. The provisions of Title 23 of the Virginia Administrative Code (VAC) 10-210-730 C also support this conclusion.
Virginia Code § 58.1-625 requires dealers to separately state the amount of sales tax and add the tax to the sales price or charge. Title 23 VAC 10-210-340 further provides that "[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" (the customer's receipt). The Taxpayer's invoices reflected a lump sum price that included taxes. Because the Taxpayer's records indicated that the tax was applied to each portion of the package, the Department's auditor held the Taxpayer liable for the tax only on the untaxed portion, the green fees.
The Taxpayer agrees that the laws and regulations apply the sales tax to such charges. However, the Taxpayer asks for waiver of such charges on the basis that it was not made aware of the taxability of the green fees when charged as part of an accommodations package. The Taxpayer references a prior decision in P.D. 03-93 (12/10/03) by the Tax Commissioner in which similar charges were applied but were waived because the details of the lump sum accommodation charges were recorded separately in the hotel's records. The Taxpayer's records, in this instance, provide the same detail reflecting that all charges were separately listed and subjected to the tax with the exception of the green fees.
Based on the information presented, I will allow for the waiver of the tax and interest on the green fees for the audit period at issue. I note that the Taxpayer is currently charging the tax on the green fees portion of the packages that are being sold. The Taxpayer must separately state the tax on its customer invoices to be in compliance with Va. Code § 58.1-625 and Title 23 VAC 10-210-340.
Compliance Penalty
Virginia Code § 58.1-635 mandates the application of penalty to tax deficiencies. Title 23 of the Virginia Administrative Code 10-210-2032 provides that when an audit by the Department discloses that the sales tax has been collected but not remitted, the penalty will apply. In this instance, the Taxpayer collected the tax at 3% on food items sold in the gift shop, but remitted the tax at the 2.5% rate.
Virginia Code § 58.1-625 provides that all sales taxes collected by dealers are held in trust for the Commonwealth and must be remitted to the Tax Commissioner. Because the Taxpayer held the collected taxes in trust for the Commonwealth and did not remit all of the amounts collected, there is no basis for a waiver of the penalty.
Post-Amnesty Penalty
Virginia Code § 58.1-1840.1 established the Virginia Tax Amnesty Program, providing that:
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- If any taxpayer eligible for amnesty under this section and under the rules and guidelines established by the Tax Commissioner retains an outstanding balance after the close of the Virginia Tax Amnesty Program because of the nonpayment, underpayment, nonreporting or underreporting of any tax liability eligible for relief under the Virginia Tax Amnesty Program, then such balance shall be subject to a 20 percent penalty on the unpaid tax. This penalty is in addition to all other penalties that may apply to the Taxpayer.
Because the audit at issue covered Amnesty-eligible periods (taxable periods ending on or before May 31, 2009), and a compliance penalty was properly applied, the post-amnesty penalty was also properly assessed.
Based on the foregoing, the uncontested portion of the assessment including the penalties is correct, and no refund is due on any portion of the amount that has been paid. The contested portion of the Department's assessment will be abated as previously discussed.
The Code of Virginia sections, regulations and public documents cited are available on-line in the Tax Policy Library section of the Department's website located at www.tax.virginia.gov. If you have any questions regarding this matter, please contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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- Craig M. Burns
Tax Commissioner
- Craig M. Burns
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AR/1-5004601184.Q
Rulings of the Tax Commissioner