Document Number
88-320
Tax Type
Retail Sales and Use Tax
Description
Meals purchased by airline for international flights
Topic
Taxability of Persons and Transactions
Date Issued
12-07-1988
December 7, 1988


Re: §58.1-1821 Application: Sales and Use Tax


Dear******************

This will reply to your letter of October 18, 1988, in which You submit an application for correction of sales and use tax assessed *********** to as the result of a recent audit.
FACTS

The taxpayer is an airline that qualifies for the exemption from the sales and use tax set out in §58.1-608(26) of the Code of Virginia. An audit of the taxpayer produced an assessment for its failure to remit tax on purchases of meals for consumption aboard its nonstop international flights from Dulles International Airport.

The taxpayer contends that due to the length (14 hours) of its nonstop nights, meals for its flight crews and passengers are in fact used directly in the rendition of its public service. Alternatively, the taxpayer contends that the meals are specifically included in the price of passenger tickets and thus enjoy the resale exemption.
DETERMINATION

Virginia Regulation 630-10-7 specifically provides:
    • Meals, snacks, and beverages furnished by ... an airline to passengers or others are not used or consumed ... by the airline directly in the rendition of its common carrier service and are subject to tax.
The above regulation was adopted in accordance with the Administrative Process Act (APA). §58.1-205 of the Code of Virginia provides:
    • In any proceeding relating to the interpretation or enforcement of the tax laws of the Commonwealth ... [a]ny regulation promulgated (under the APA) ... shall be sustained unless unreasonable or plainly inconsistent with applicable provisions of law.

In this case, the department's regulation is directly supported by the opinion of the Virginia Supreme Court in Commonwealth v. United Airlines, 219 Va. 374, 248 S.E.2d 124 (1978), as well as its opinion in Commonwealth v. Community Motor Bus, 214 Va. 156, 198 S.E.2d 619 (1973). Further, the court has established a doctrine of strict construction in the interpretation of sales and use tax exemptions. Thus, where there is any doubt, the doubt is resolved against the one claiming exemption. Golden Skillet v. Commonwealth, 214 Va. 276, 199 S.E.2d 511 (1973)

In United, the court held that:
    • food and related items cannot be considered essential tangible personal property "used immediately and principally" ... to transport passengers by air ...
Despite the length of the taxpayer's flights, the fact remains that meals are not essential to the provision of common carrier service, in contrast to anti-hijacking equipment, integrated information systems, and passenger and baggage service equipment which the court found to be nontaxable in United.

Flight crew meals are similarly not essential for the rendition of common carrier service. While not specifically stated in VR 630-10-7, VR 630-10-24.4 on common carriers by railway provides that "crew meals" are subject to the tax.

Further, the court held in United that meals purchased for service to passengers did not enjoy the resale exemption. As was the case in United, the taxpayer does not make a separate charge for meals, but furnishes them as part of the overall cost of its airline tickets. As such, I find no basis for distinguishing this matter from United due solely to the fact that the taxpayer may specifically factor the price of meals into its ticket prices.

Based upon the foregoing, I do not find basis for the correction of the taxpayer's audit assessment or the issuance of a refund for tax paid since March 1988. As such. the assessment is due and payable in full.

Sincerely,



W. H. Forst
Tax Commissioner

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46