Tax Type
Retail Sales and Use Tax
Description
Catering business; Rental or purchase of linens, tents, etc.
Topic
Property Subject to Tax
Date Issued
01-29-1993
January 29, 1993
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This will reply to your letter in which you seek correction of a sales and use tax assessment for ***** and its successor, **** (the Taxpayer).
FACTS
The Taxpayer operates as a full-service catering company. An audit for the period January 1988 through October 1990 produced an assessment for the Taxpayer's failure to remit the tax primarily on the purchase and rental of various articles of tangible personal property used in the performance of its catering business.
The Taxpayer contests the tax on the lease, rental or purchase of certain items which are obtained from third party vendors. These items are described as (i) food service equipment, such as serving utensils and chafing dishes; (ii) dinnerware, including plates, eating utensil and linens; (iii) furnishings, such as chairs, tables, and tents; and (iv) party accessories, including invitations, flowers and other disposable items. You indicate that these items are obtained by the Taxpayer solely at the request of its customers, and that many customers elect to provide their own dinnerware, furnishings, etc.
When the Taxpayer provides these items, it makes a separate charge which includes the cost of the items plus a markup, and the Taxpayer collects the tax from its customers on this total charge. The Taxpayer therefore contends that the contested items which are subsequently resold or relet to customers may be leased, rented or purchased exempt for resale.
The Taxpayer further contends that the assessments include items that were delivered by vendors directly to locations outside of Virginia.
DETERMINATION
No evidence has been submitted which substantiates the contention that tangible personal property leased or rented by the Taxpayer and delivered by its vendors directly to a location outside of Virginia is included in the assessment. Therefore, the removal of any items from the assessment on these grounds is unwarranted.
Furthermore, the department's policy regarding the lease or rental of tangible personal property by caterers was discussed in the enclosed Public Document 89-167 (5/22/89). In November 1992 the department reviewed and confirmed this policy in Virginia Tax Bulletin 92-10, a copy of which is enclosed. As noted in that document, food preparation and serving items, including dinnerware, tables, linens, etc. cannot be purchased or rented by a caterer under a Resale Exemption Certificate. The Bulletin further mandates that the tax must be computed on the total amount charged to the customer for these items even if the charges are separately stated.
However, the Taxpayer's purchases of disposable items furnished with meals and disposed of after use by one customer may be made under resale exemption. Provided that customers were charged the tax on the total sales price of disposable items purchased by the Taxpayer, such items will be removed from the assessment.
While the bulk of the contested items are taxable under this determination, the auditor will contact the Taxpayer to ascertain which disposable items may be removed from the assessment. Based on the auditor's review, a revised assessment will be issued.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/5515I
Related Documents
Rulings of the Tax Commissioner