Tax Type
Retail Sales and Use Tax
Description
Manufacturing, processing, assembling, or refining; Restaurants
Topic
Taxability of Persons and Transactions
Date Issued
09-27-1996
September 27, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear*********************
In your letter of August 23, 1996, you request a ruling as to the retail sales and use tax application to beer brewing equipment being installed in a restaurant being built by************(the"Taxpayer").
FACTS
The Taxpayer is building a restaurant which will include a brewery. The restaurant will brew its own beer for sale to its patrons. On premises brewed beer is anticipated to comprise 25% of total restaurant sales. The Taxpayer is requesting a manufacturing exemption for the brewery equipment.
RULING
Code of Virginia § 58.1-609.3(2) provides a sales and use tax exemption for "machinery or tools or repair parts therefor or replacement thereof... used directly in processing, manufacturing... products for sale or resale". The department has traditionally limited the manufacturer's exemption to manufacturing processes that are industrial in nature. Virginia Regulation (VR) 630-10-63.B(1) (copy enclosed) provides that "establishments which manufacture... tangible personal property as an incidental part of a retail establishment... business are generally deemed to be engaged in non-industrial activities". (Emphasis added). This regulation goes on to provide that establishments of this type include restaurants which process food products primarily for direct sale on the premises to consumers.
Based on the information provided in your letter, and on the reading of the statute and regulation cited above, the Taxpayer's brewing operation does not qualify as industrial manufacturing and is incidental to the retail portion of the restaurant business. Should the nature of the Taxpayer's brewing operation change, I will be glad to revisit this issue to determine if the manufacturing exemption applies.
If you should have any further questions, please contact****** Office of Tax Policy, at**********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11611K
Rulings of the Tax Commissioner