Tax Type
Retail Sales and Use Tax
Description
Resales; Coffee Brewing and Dispensing Equipment
Topic
Taxability of Persons and Transactions
Date Issued
08-19-1992
August 19, 1992
Re: §58.1-1821 Application: Retail Sales & Use Tax
Dear****************
This will reply to your letter of November 18, 1991 in which you seek correction of a sales and use tax to your client,******************(the "Taxpayer") for the period May 1988 through April 1991.
FACTS
The Taxpayer operates a coffee/beverage service. The coffee brewing/drink dispensing equipment is provided to customers by the Taxpayer and customers are required to purchase a minimum amount of product. The Taxpayer charges its customers a price for the product that it maintains includes both the product sale and the use of the equipment.
The Taxpayer was recently audited and held liable primarily on the untaxed purchases of coffee brewing and drink dispensing equipment. It maintains that the purchase of the brewing and dispensing equipment should be exempt from the tax since it is subsequently "used in retail sales, that is to say, they are rented, although the rental is not separately stated" on the sales invoice. It points out that the industry standard is to operate as the Taxpayer does in that no rental charges to customers for equipment are separately stated on sales invoices.
The Taxpayer seeks correction of the assessment.
DETERMINATION
Notwithstanding your reference to the industry standard, the department has historically held coffee service companies liable for the sales and use tax on the Purchase of coffee machines. A review of sample invoices/contracts included in the auditor's report indicates that the equipment is "loaned" not leased to customers. Thus, the Taxpayer is the actual user and ultimate consumer of the equipment in question. Machines are purchased by the Taxpayer, not for resale or for lease within the accepted meaning of that term, but as equipment which will be used in the promotion of sales of its products.
Accordingly, I find no basis for revision of the assessment which is due and payable. A revised Notice of Assessment with accrued interest will be mailed to the Taxpayer shortly.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner