Tax Type
Retail Sales and Use Tax
Description
Caterer labor charges
Topic
Taxability of Persons and Transactions
Date Issued
06-20-1988
June 20, 1988
Re: §58.1-1821 Application/Retail Sales and Use Tax
Dear******************
This will reply to your letter of January 20, 1988, seeking the correction of an assessment issued in the above referenced case for the period January, 1984, through October, 1986.
FACTS
************* ("The Taxpayer"), was audited for the period of January, 1984, through October 1986, and held liable for failure to collect sales tax on its charges for personnel labor performed in conjunction with the provision of food services.
When the Taxpayer caters an event, it contacts waiters/waitresses and bartenders not employed by the Taxpayer to work at the catered event. The taxpayer's agreement with customers states that "[p]ersonnel are assigned at the discretion of the caterer. In all instances...[the -Taxpayer]...reserves the right to determine appropriate numbers of personnel. Personnel are subcontracted and billed separately unless other arrangements have been made." The Taxpayer sets the costs for personnel, and the charge for such personnel is reflected on the Taxpayer's invoice to the customer. Payment is made directly by the customer to personnel.
The Taxpayer contends that he is not liable for the sales tax because: 1. Price for the personnel is set by the union and such personnel are independent contractors. 2. Payment to personnel does not flow through the Taxpayer's company. 3. The Taxpayer was informed via telephone in 1966 by the Department that such services are exempt from the tax.
DETERMINATION
§630-10-64 of the Virginia Retail Sales and Use Tax Regulations states that "[r]etail sales of meals by...caterers are taxable." Furthermore, Regulation §630-10-97.1 states that "[t]he tax [sales tax] does apply to charges made for...any service included in or in connection with the sale of tangible personal property.
Virginia Code §58.1-603(1), imposes sales tax on "the gross sales price of each item...of tangible personal property when sold at retail or distributed in this Commonwealth. Virginia Code §58.1-602(17), defines "sales price" as "the total amount for which tangible personal property or services are sold, including any services that are part of the sale. Va. Code §58.1-602(17), lists six exclusions which are not considered "sales price" and Va. Code §58.1-608, dealing with exclusions and exemptions from retail sales tax; neither of these sections apply to the Taxpayer. Following this line of reasoning and also following the general rule that taxation is the rule and exemptions from tax are strictly construed, the Taxpayer is liable for sales tax on the personnel services used at catered events. Regulation 630-10-35.2.
It is irrelevant who sets the price for the wages of personnel. Many professions have unions which set minimum wage requirements for their members and it is the Taxpayer's choice to use union members for his outside personnel pool. We do not agree that the personnel, even though they are not full time employees of the Taxpayer, are independent contractors because: 1) The Taxpayer retains the right of control over the personnel. 2) The Taxpayer "reserves the right to determine appropriate numbers of personnel" which creates a master/servant relationship and is a necessary element for full performance of the Taxpayer's contract with customer.
Also, it is inconsequential that payment to the personnel does not flow through the Taxpayer but flows from the customer to the personnel. The personnel are a necessary element of Taxpayer's agreement regardless of who pays the bill.
Finally, irrespective of the verbal advice which the Taxpayer asserts to have received in 1966, the Retail Sales and Use Tax Regulations, published in 1966, 1969, 1979, and 1985 specifically state that services in connection with the sale of tangible personal property are subject to the tax.
Therefore, there is no specific exemption or exclusion that applies to the Taxpayer. The service that the Taxpayer supplies is in connection with the sale of tangible personal property and is subject to sales tax.
Based on all of the foregoing, I find no basis for correction of the assessment. which is now due and payable.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner