April 11, 2016
Re: Request for Ruling: Retail Sales and Use Tax
This will reply to your letter in which ***** (the "Taxpayer") request permission to collect the reduced sales tax rate on food items sold through their truck service. I apologize for the delay in responding to your request.
The Taxpayer operates ice cream trucks that sell prepackaged ice cream products. The Taxpayer is currently collecting and paying the full 5% state sales tax rate (plus the 1% local tax). The Taxpayer requests permission to collect the reduced food sales tax rate of 2.5% on its sales, citing the definition of food for home consumption as defined in the Food Stamp Act of 1977, 7 U.S.C. § 2012.
The Taxpayer bases its request on the fact it only sells prepackaged ice cream products, and it does not produce and sell soft-serve ice cream products from its trucks. The Taxpayer asserts that it sells the same products that can be purchased at the reduced rate in traditional grocery stores; however, the only distinction is the delivery method via truck. It should be noted that the Taxpayer sells individually prepackaged popsicles and other ice cream products, and does not sell any product in bulk quantities.
Virginia Code § 58.1-611.1 provides for a reduction in the Virginia retail sales and use tax on eligible food products sold for home consumption. The current state sales tax rate on food sold for home consumption is 1.5% state tax and 1% local sales tax, for a combined sales tax rate of 2.5%. Subsection C of this statute provides that "As used in this section, 'food purchased for human consumption' has the same meaning as 'food' defined in the Food Stamp Act of 1977, 7 U.S.C. § 2012, as amended, and federal regulations adopted pursuant to that Act, except is shall not include seeds and plants for human consumption." Virginia Tax Bulletin 05-7 (5/31/05) sets forth the Departmental policy and application of the Virginia retail sales and use tax food tax reduction program. In addition to the above statutory definition of eligible food items, the Department expands on the definition to include most staple grocery food items and cold prepared foods packaged for home consumption. The Tax Bulletin specifically excludes from the definition of food for home consumption alcoholic beverages, tobacco and prepared hot foods sold for immediate consumption on and off the premises.
The Tax Bulletin further defines the term "retailer" for purposes of the food tax reduction to include bakeries, cafes, cafeterias, convenient stores, delicatessens, department stores, diners, doughnut and pastry shops, drug and sundry stores, farmer's markets, grocery stores, ice cream shops, lunch counters, mail order companies, supermarkets, sandwich shops, snack bars, specialty meats and produce stores, video stores, and weight reduction establishments. The Tax Bulletin also provides an exception to traditional retailers and provides the following:
Some vendors are presumed sellers of food for immediate consumption and may not impose the reduced sales tax rate on sales of eligible foods. These include caterers, concession stands, entertainment facilities..., fairs and carnival vendors, gift shops, hamburger and hot dog stands, honor snack vendors, ice cream stands and trucks, mobile food vendors, movie theaters, newsstands, and vending machine vendors. [Emphasis added].
Based on the reading of Tax Bulletin 05-7, it is the Department's policy that single serve ice cream sold by an ice cream truck does not qualify for the reduced sales tax rate on eligible food items. The Tax Bulletin does not distinguish between individually prepackaged single serve ice cream food items and single serve ice cream food items that are produced on the truck, i.e., soft serve ice cream cones and cups. It is the Department's position that both pre-packaged single serve ice cream and soft serve ice cream sold by ice cream trucks are predominantly sold for immediate consumption and are subject to the full retail sales tax rate.
The Code of Virginia section and tax bulletin cited in this letter are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's website. If you should have any questions concerning this response, please contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Craig M. Burns