April 13, 2022
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 December 2014 through November 2017. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer, a nonprofit private country club in Virginia, holds golf tournaments for its members. Participating members purchase tickets that includes greens fees, light refreshments and a catered meal. The Taxpayer did not separate the greens fee from the price of refreshments or catered meals in the price for the ticket. In addition, cash awards are given to tournament winners.
As a result of the Department’s audit, the Taxpayer was assessed tax and interest on the sale of tournament tickets as well as the cash awards handed out to tournament winners. The Taxpayer appeals, contending that the primary purpose of the fee for the ticket was participation in the tournament and the provision of any food was merely a benefit of membership. The Taxpayer also argues that tax was paid to its food vendors at the time it was purchased and that it should be allowed a credit towards the sales tax owed. Finally, the Taxpayer asserts that the cash awards should not be taxable as no personal property was provided.
DETERMINATION
Tournament Tickets
Virginia Code § 58.1-602 defines sales price as “the total amount for which personal property or services are sold.”
Title 23 of the Virginia Administrative Code (VAC) 10-210-30 states:
The tax does not apply to sales of tickets, fees, charges, or voluntary contributions for admissions to places of amusement, entertainment, exhibition, display, or athletic contests, nor to charges made for participation in games or amusement activities. However, “cover charges” or “minimum charges” which include the provision of or the entitlement to food, drinks, or other tangible property constitute a sale of property and are subject to the tax…
The Department has previously determined that transactions involving the sale of admissions and tangible personal property are taxable. In Public Document (P.D.) 02-77 (5/2/2002), a hotel and conference center that operated a theatre. The taxpayer sold tickets for theatre admission, and also offered dinner theatre packages that included admission to the theatre and a meal for a single charge. Pursuant to Title 32 VAC 10-210-30, Title 23 VAC 10-210-930 (sale of meals) and the Virginia Code § 58.1-602 definition of sales, it was determined that the total charge for the dinner theatre package was taxable due to the fact charges for the meal and charges for theatre admission were not separately stated.
Further, the Department distinguished the hotel and conference center from a dinner theater in P.D. 85-167 (9/3/1995), wherein the charges were segregated between the dinner and the for theatre admission. In doing so, the dinner theater clearly and specifically identified the taxable dinner charge from the nontaxable theatre admission.
In P.D. 08-76 (6/6/2008), meanwhile, a nonprofit membership corporation was assessed tax and interest on the sale of event tickets to members that included catered meals. In its appeal, the membership corporation contended that the primary purpose of the events were not the provision of the catered meal, but rather the entertainment or business purposes. While the tax does not apply to admissions pursuant to Title 23 VAC 10-210-30, admissions were provided in conjunction with a taxable meal. The fact that the primary purpose of the events may not be the catered meal did not alter the fact that the ticket price included the provision of a taxable meal. Based upon the definition of sales price, the total charge for the ticket, which included the provision of a catered meal, was deemed taxable.
Consistent with the Department’s position in P.D. 08-76, the fact that the primary purpose of the tournament may not be the catered meal does not alter the fact that the ticket price includes the provision of a taxable meal. Further, pursuant with the Department’s determination in P.D. 02-77, because the charges for the greens fees were not separately stated from the charges for refreshments and the catered meal, the total charge for the ticket was taxable. Accordingly, the auditor was correct in assessing the tax on the sale of tickets that include the provision of catered meals.
Tax Paid to Vendors
Virginia Code § 58.1-633 A states:
Every dealer required to make a return and pay or collect any tax under this chapter shall keep and preserve suitable records of the sales, leases, or purchases, as the case may be, taxable under this chapter, and such other books of account as may be necessary to determine the amount of tax due hereunder, and such other pertinent information as may be required by the Tax Commissioner.
Title 23 of the Virginia Administrative Code 10-210-470, which interprets Virginia Code § 58.1-633, states “[e]very person who is liable for the collection of sales tax or remittance of use tax or both is required to keep and preserve for three years adequate and complete records necessary to determine the amount of tax liability.” Such documentation includes records for all tangible personal property used or consumed in the conduct of business and records for all merchandise purchased including bills of lading, invoices, purchase orders, and other evidence to substantiate each purchase.
While the Taxpayer claims they paid the sales tax to vendors for the food items purchased for tournaments, the Taxpayer has not provided documentation to substantiate this claim.
Virginia Code § 58.1-205 deems assessments issued by the Department to be prima facie correct. This means that the burden of proving the assessment is incorrect rests upon the Taxpayer. The provision of adequate records and other documentation is necessary to prove that the tax assessed in the audit is incorrect. In this instance, the Taxpayer has not met the burden of proof.
For purposes of this audit only, if the Taxpayer can produce documentation that the tax was paid on food items provided in connection with the tournaments, I will allow credit in the audit for the tax paid. Absent such evidence, there is no basis to revise the Department’s audit.
Cash Prizes
Upon review of the Taxpayer’s records, the auditor could not determine whether line items listed as awards were for the provision of tangible personal property or simply cash awards. The Taxpayer has provided advertisements and checks from accounting software that show the Taxpayer paid cash awards to tournament winners without the provision of tangible personal property. For this reason, I find cause to remove these three items from the audit. In the future, the Taxpayer should keep physical copies of checks and records that more clearly display that cash awards are given to tournament winners without the provision of any tangible personal property.
CONCLUSION
Based on the above determination, the audit will be adjusted accordingly. I will allow the Taxpayer 60 days from the date of this letter to furnish documentation to the auditor to substantiate sales tax paid to vendors in connection with the purchase of food for the tournaments. Should the Taxpayer fail to provide the records and documentation to the auditor within the allotted timeframe, the assessment will become immediately due and payable at that time.
The Code of Virginia sections, regulations, and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s web site. If you have any questions about this determination, you may contact ***** in the Department’s Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1765.A