Tax Type
Retail Sales and Use Tax
Description
Tax base; Failure to state tax on receipts
Topic
Basis of Tax
Date Issued
07-22-1994
July 22, 1994
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear*************
This will reply to your letter of May 10, 1993 in which you seek correction of a sales and use tax assessment on behalf of your client, ******* (the "Taxpayer") for the period March 1991 through July 1992.
FACTS
The Taxpayer is a restaurant and lounge. In ringing up its sales of alcoholic beverages, the Taxpayer did not separately state the amount of tax; instead, the total cost to customers was shown on the receipt. Tax was remitted based upon the price of the items and not on the gross sales as shown on the cash register receipts. The auditor assessed tax on the total amount of gross sales as reported by the cash register receipts. The Taxpayer protests the assessment, maintaining that a list of drinks was posted with a breakdown of the cost and the applicable tax; therefore, the proper amount of tax was remitted and there was no absorption of the tax.
DETERMINATION
Under Va Code §58.1-625, a dealer is required to separately state the amount of the tax and add the tax to the sales price or charge. Virginia Regulation (VR) 630-10-24(A) provides additional guidance on the above statutory requirement, explaining "Identification of the tax by a separate writing or symbol is not required provided that the amount of the tax is shown as a separate item on the record of the transaction." (Emphasis added).
The statute and the regulation clearly set forth the requirement that the tax must be separately stated and added to the price of goods sold at retail. When the Taxpayer included the tax in the sales price of beverages but did not list the tax separately on the record of the transaction (the cash register receipt), it failed to meet this requirement.
You assert that a drink list was posted in the lounge, indicating the price of the drink and the amount of tax separately, and also the total charge. However, the auditor states that no such list existed at the time of the audit. Even assuming that such a list was posted in the lounge, the Taxpayer did not meet the requirement of the statute and the regulation which states that the tax must be separately stated on the record of the transaction.
Va. Code §58.1-614(D) provides that when a dealer is able to demonstrate to the satisfaction of the Tax Commissioner that it is impractical to, collect the tax in accordance with the bracket system, it may be authorized to remit an amount based on a percentage of gross receipts which takes into account the inclusion of the sales tax. In this case, the Taxpayer did not receive such authorization. Furthermore, you have not demonstrated that it was impractical for the Taxpayer to collect the tax in accordance with the bracket system.
Accordingly, there is no basis for revising the assessment. The Taxpayer will shortly receive an updated bill with interest accrued to date. The bill should be paid within 30 days to avoid the accrual of additional interest.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/6983F
Rulings of the Tax Commissioner