Tax Type
Retail Sales and Use Tax
Description
Pricing structure during Happy Hour
Topic
Property Subject to Tax
Taxable Income
Date Issued
04-27-1982
April 27, 1982
Re: 58-1118 Application/Sales and Use
Dear ************************
This will reply to your letter of December 23, 1980 in which you apply for correction of use tax assessed against your client, ********************* Associates, as the result of an audit and your letter of September 21, 1981 in which you furnished additional information.
Facts
********* Associates ***********operates a ********** in *********** and in conjunction therewith also operates a private club. The use of ********* is restricted to members of the club and guests at the *******
**********holds a daily "Happy Hour" during which customers receive two drinks and hors d'oeuvres for the price of one drink. During Happy Hour customers received two mixed drinks and the hors d'oeuvres for $2.00 which is the customary charge for one mixed drink. The price of soft drinks is increased from $0.65 to $1.50 during Happy Hour.
********** was assessed use tax on the hors d'oeuvres served during Happy Hour.
Determination
§58-441.5 of the Code of Virginia imposes a tax upon "the use or consumption of tangible personal property in this State." The term "use" is defined by Virginia Code §58-441.3(h) as "the exercise of any right or power over tangible personal property...except that it does not include the sale at retail of that property in the regular course of business."
The pertinent question in this case is, whether the hors d'oeuvres served during Happy Hour constitute tangible personal property sold at retail. You contend that this property is a part of a retail sale on which the sales tax is collected, and should therefore be exempt from the sales tax at the time of purchase.
Implicit in the structure of ***********Happy Hour is the understanding that during a certain time period, a customer receives two drinks and hors d'oeuvres for the same price he normally pays for one mixed drink, soft drinks notwithstanding. Based upon the form of this transaction, there is no evidence that any charge is made for an additional drink or hors d'oeuvres, except in the case of soft drinks. While the underlying facts may indicate that patrons are paying for the hors d'oeuvres and the dealer is simply lowering his pro it margin, they may also indicate that the dealer is using free drinks and hors d'oeuvres as enticement to attract patrons or members. Thus, we cannot attempt to look beyond the form of the instant transactions.
Under the provisions of §58-441.2(b) there are two components of a "sale." First, there must be a transfer of title or possession of tangible personal property, and second there must be 2 consideration. While the furnishing of hors d'oeuvres is a transfer of title and possession, there is no evidence that there is any consideration. Although the price of one item, soft drinks, is increased during Happy Hour, the price of other items, mixed drinks, is not increased. Thus, the pricing structure during Happy Hour when compared to the pricing structure during other times does not demonstrate that there is any consideration for the hors d'oeuvres.
Therefore, I find no basis for accepting your application. for correction.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner