Tax Type
Retail Sales and Use Tax
Description
Government transactions; Meals purchased and sold by local government
Topic
Taxability of Persons and Transactions
Date Issued
03-04-1996
March 4, 1996
Dear***************
This will reply to your letter of January 11, 1996 concerning the application of the sales and use tax to the purchase of food and catering services.
It is my understanding, the county operates a cafeteria that engages in the sale of food and catering services to interdepartmental divisions. The county also purchases food and catering services from an outside caterer for official government functions. As indicated in your letter, the county was informed by a department representative that the purchase of food and catering services is subject to the tax. You have questioned this information and ask whether the county can make such purchases exempt of the tax. Code of Virginia § 58.1-609.1(4) provides an exemption from the sales and use tax for "[t]angible personal property for use or consumption by the Commonwealth, any political subdivision of the Commonwealth, or the United States."
The application of the tax to sales made to or by the Commonwealth and its political subdivisions is governed by Virginia Regulation (VR) 630-10-45. This regulation was last revised July 1, 1994 and explains that sales of tangible personal property and taxable services by state and local governments are taxable, except for certain specifically exempt items such as official flags, school lunches, and textbooks. § 2.1 of this same regulation provides that "sales by the state, its agencies and political subdivisions generally are taxable...[and]...any state agency or locality making sales of tangible personal property not otherwise exempt shall register as a dealer with the department and collect and remit the sales tax on its sales." § 1.2 clarifies existing department policy with respect to purchases made by the Commonwealth and its political subdivisions and provides that "charges for meals, catered events...are subject to the tax when paid for by the state or local government...regardless of whether the purchases are made pursuant to required official purchase orders."
Further, The Attorney General's opinion (ATTY GEN. ANN. REP.: 1969-1970 at 291) addressed the issue of the application of the government exemption to meals purchased by the Commonwealth with public funds and consumed by guests attending a conference hosted by the Commonwealth. The opinion referenced "use" (as defined in Code of Virginia § 58.1-602) as meaning the exercise of any right or power tangible personal property incident to the ownership thereof. The Attorney General's opinion held that the exemption for tangible personal property for use or consumption by the Commonwealth did not extend to the sales of meals even though the purchase of meals was made for governmental purposes and paid for out of public funds. The conclusion reached in the 1970 Opinion is consistent with VR 630-10-45 § 1.2. I would also note that the 1970 Attorney General's opinion was affirmed in an informal opinion issued on January 11, 1993. I have enclosed copies of both for your review, as well as a copy of P.D. 89-291 (10/27/89) and Ruling of the Tax Commissioner dated January 12, 1982 relating to the sale of food to government agencies.
In this case, the agency exercises no right or power over the food purchased from and prepared by a caterer for use and consumption in official government functions. This is true whether or not the food is purchased pursuant to official purchase order and paid for out of public funds. Therefore, the agency may not purchase such food exempt of the tax
With respect to the sale of food by a state agency to interdepartmental divisions, the enclosed P.D. 84-277 (11/4/84) explains that the sale of food and catering services by a nonprofit state university to interdepartmental divisions was deemed taxable because the meals were not consumed by the otherwise exempt organization. The same is true regardless of whether purchases are paid for directly by the agency and out of public funds.
I trust the foregoing has responded to your questions. If you should have any further questions regarding this ruling, you may contact **** at ***** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10836T
Rulings of the Tax Commissioner