Tax Type
Retail Sales and Use Tax
Description
Lodging; Green fees
Topic
Taxability of Persons and Transactions
Date Issued
02-02-1995
February 2, 1995
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear******************
This will reply to your letter of September 16, 1994 in which you seek correction of a sales and use tax assessment issued to ***************( the "Taxpayer").
FACTS
The Taxpayer owns and operates a hotel in Virginia. An audit of the Taxpayer for the period of July 1991 through June 1994 resulted in an assessment for certain untaxed sales and purchases. The Taxpayer protests the tax assessed on green fees which are part of the hotel's golf package and on the rental of rooms to foreign diplomats. The Taxpayer also questions the markup percentage applied to long-distance telephone charges.
DETERMINATION
Golf Packages: The Taxpayer offers a golf package which, for a single charge, includes a hotel room, breakfast, a complimentary tee gift, and pays for a round of golf ("green fees") at a local golf course. The Taxpayer charged and remitted the tax on room and meal charges but did not charge the tax on that portion of the package which covered green fees.
Although you are correct in that the sales tax normally does not apply to true service transactions, it does apply to services performed in connection with the taxable sale or rental of tangible personal property and accommodations. Code of Virginia §58.1-602 defines "sales price" as "the total amount for which tangible personal property or services are sold, including any services that are a part of the sale." Somewhat more broadly, the statute defines "gross proceeds" as "the charges made or voluntary contributions received for ... furnishing services." Accordingly, these provisions serve to ensure that tax is collected on the total price charged for tangible personal property, accommodations, and any services that are part of the transaction.
While green fees are not taxable in and of themselves, green fees (and other services) charged in connection with the Taxpayer's golf packages are an integral element of the taxable lodging transaction and are taxable. Accordingly, the application of the tax to green fees sold in connection with the Taxpayer's accommodations is correct.
In some instances, motel guests request the Taxpayer to arrange for an additional round of golf which is not part of the original charge for the golf package. Green fee charges are not taxable if separately stated on the invoice to the customer. No tax was assessed in the audit on these types of green fee charges.
Further, the Taxpayer indicates that when previously audited, no tax was assessed on golf packages. However, the documentation recently furnished the department shows that during the previous audit period, the Taxpayer was correctly charging and collecting tax on the total amount charged for the golf packages.
Markups on Long Distance Toll Charges: Based on an analysis of 97 long distance phone calls made over a nine day period, the auditor calculated an average markup on toll charges. It is my understanding that the Taxpayer is unable to present any evidence establishing a lower percentage of markup. Accordingly, based on the information before me, the markup applied to the telephone charges is correct as assessed.
Room Rentals to Diplomats: The Taxpayer maintains that it has satisfied the record keeping requirement of Virginia Regulation 630-10-45 (F) by obtaining the diplomat's exemption card number and annotating it on the record of the sale. We have verified with the Department of State that the exemption cards were valid at the time of sale, and these charges will be removed from the audit.
In addition to obtaining the exemption card number from diplomats, the Taxpayer is encouraged to obtain the expiration date of the card. A photocopy of the diplomat's exemption card is not required provided that this information is indicated on the record of sale.
The audit will be revised in accordance with this determination, and a revised assessment will be issued as soon as possible. If you have any questions regarding this letter, please contact***********.
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- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
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OTP/8685R
Rulings of the Tax Commissioner