Tax Type
Retail Sales and Use Tax
Description
Resales
Topic
Taxability of Persons and Transactions
Date Issued
09-23-1996
September 23, 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 your client, ***** (the "Taxpayer") for the period December 1988 through November 1994.
FACTS
The Taxpayer is engaged in racetrack management services. As a result of the department's audit, an assessment was made for certain untaxed purchases of food, beverages and souvenirs. In addition, the Taxpayer was assessed tax on the untaxed lease of a portable concession stand to an affiliate corporation.
The Taxpayer maintains that it contracted with an affiliate food service corporation to operate a fully equipped concession stand at the racetrack. The Taxpayer further maintains that it purchased food, beverages and souvenirs for resale to the affiliate food service. The Taxpayer contends that the amount held in the audit for "Concession Rentals" not only represents the lease of the concession stand but also includes the reimbursement cost of food, beverages and souvenirs purchased for the affiliate corporation as well as charges for location privileges.
I will address the issues separately below.
DETERMINATION
Code of Virginia § 58.1-633 provides that "Every dealer required to make a return and pay or collect any tax under this chapter shall keep and preserve suitable records of the sales, leases, or purchases...taxable under this chapter, and such other books of account as may be necessary to determine the amount of tax due hereunder, and such other pertinent information as may be required by the Tax Commissioner."
Purchases: Virginia Regulation 630-10-20 provides that "[A]ll sales, leases and rentals of tangible personal property are subject to the tax until the contrary is established. The burden of proving that the tax does not apply rests with the dealer unless he takes, in good faith from the purchaser or lessee, a certificate of exemption indicating that the property is exempt under the law."
The Taxpayer maintains that food, beverages and souvenirs were purchases for resale to the affiliate corporation but was unable to provide the department with a valid certificate of exemption to support its claim. In lieu of a certificate of exemption, the Taxpayer submits purchase invoices as evidence that the items purchased were shipped directly to the affiliate food corporation and the racetrack location. The Taxpayer further maintains that the affiliate corporation reimbursed it for these purchases and the payment is included in the "Concession Rentals" account.
The transactions between the Taxpayer and the vendor, and between the Taxpayer and the affiliate company, were invoiced to the Taxpayer. As such, the Taxpayer is liable for the tax on the purchased items unless the Taxpayer can prove otherwise. While the invoice provides documentation that the items in question were shipped to the affiliate corporation or the racetrack location, the invoice does not provide any evidence that the affiliate corporation reimbursed the Taxpayer for these items. Despite the Taxpayer's contention that these invoices provide proof that such items were purchased for and reimbursed by the affiliate food corporation, I cannot agree that such documentation supports this contention.
In addition, it is my understanding that the Taxpayer never entered into a written contract with the affiliate food corporation for the lease of the concession stand. Without a contract or certificate of exemption indicating that the items were purchased for resale, there is no basis for adjusting the audit with respect to these items.
Location Rent: The Taxpayer contracted with the affiliate corporation to operate fully equipped portable concession stands. The Taxpayer maintains that included in the total charge for "Concession Rental" is the charge for location rent. The Taxpayer argues that the charge for location privileges does not constitute lease payments because the charge is not for personal property nor real property.
A review of the audit workpapers indicates that the lease in question is for fully equipped concession stands. These units are portable and can be moved from site to site. As these units are not permanent structures, they are deemed tangible personal property as defined under VR 630-10-102.1.
Code of Virginia § 58.1-603 imposes the sales tax on the "gross proceeds derived from the lease or rental of tangible personal property...." "Gross proceeds" is defined in Code of Virginia § 58.1-602 as "the charges made or voluntary contributions received for the lease or rental of tangible personal property or for furnishing services, computed with the same deductions, where applicable, as for sales price...." VR 630-10-95 defines "sales price" as including "any services in connection with such sale."
In this case, the Taxpayer did not collect the tax on the charge for "location privileges" which are included in the total amount held taxable for concession rentals. The charge for location privileges is a part of the gross proceeds derived from the lease of the concession stands and subject to the tax. Based on the foregoing, the assessment with respect to the concession stand lease is correct.
Based upon the records available, the liability resulting from the audit has been accurately assessed. Nevertheless, if the Taxpayer can provide additional documentation regarding the purchases for resale issue, revisions will be made. This information should be sent to the auditor within 60 days of the date of this letter. Upon review and possible revision as a result thereof, a revised Notice of Assessment will be mailed to the Taxpayer. If the documentation is not received within the specified time period, the assessment will be considered correct as issued.
If you have any further questions regarding this determination, you may contact **** at the department's Office of Tax Policy at*******.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9362T
Rulings of the Tax Commissioner