Tax Type
Retail Sales and Use Tax
Description
Vendor/seller liability; Separate statement of tax required
Topic
Collection of Delinquent Tax
Date Issued
07-26-1996
July 26, 1996
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 to ********* (the Taxpayer) for the period November 1992 through March 1995.
FACTS
The Taxpayer operates a restaurant. Charges for sales of alcoholic beverages are made on the same ticket as meals. The Taxpayer collects the applicable sales tax on the meal but the sales tax is not explicitly charged on the alcoholic beverages. The tax is remitted based on a percentage of the gross receipts which takes into account the inclusion of the sales tax. The auditor assessed tax on the total amount of gross sales as reported by the cash register receipt.
The Taxpayer maintains that the sales tax is included in the price of the alcoholic beverages and the method used in calculating the tax has resulted in the proper tax being remitted to the department.
DETERMINATION
Under Code of Virginia § 58.1-625 (copy enclosed) 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) (copy enclosed) provides additional guidance on the above statutory requirement, explaining " [i]dentification 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 alcoholic beverages but did not list the tax separately on the record of the transaction (the cash register receipt), it failed to meet this requirement.
Virginia law allows the inclusion of the sales tax within the selling price only in very limited situations. Code of Virginia § 58.1-614(D) (copy enclosed) 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 provided for in Code of Virginia § 58.1-628, the taxpayer 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 have permission to account for the tax as specified above. Accordingly, there is no basis for revising the assessment. The Taxpayer has paid the assessment in full and no refund will be issued.
The decision is entirely consistent with the department's longstanding policy regarding this area and I am enclosing P.D.95-61 (3/29/95) which also addresses this issue. If you have any questions regarding this letter, please contact ******in the Office of Tax Policy at ******.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10766T
Rulings of the Tax Commissioner