Tax Type
Egg Excise Tax
Description
Manufacturing/Bakery Operation
Topic
Basis of Tax
Date Issued
09-30-1996
September 30, 1996
RE: Request for Rulings: Egg Excise Tax
Dear***************
This will reply to your letter in which you request a ruling on the application of the Virginia Egg Excise Tax to certain operations of**********(the "Taxpayer"). I apologize for the delay in providing you with this response.
FACTS
The Taxpayer has a manufacturing/bakery operation located in Virginia which purchases and uses egg products. The Taxpayer sells its finished goods to various distributors/retailers located within and without Virginia. You ask for a ruling on a series of questions concerning the application of the tax to certain facets of your operations. These questions will be addressed in the order in which they were presented.
RULING
To provide a background for the responses, the pertinent sections of the law are set out below:
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- Pursuant to Code of Virginia § 3.1-796.11:3:
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- There is hereby levied on eggs purchased or sold for use or consumption in Virginia an excise tax of five cents per thirty-dozen case or, if the eggs are purchased or sold in other than shell form, eleven cents per hundred pounds of liquid eggs or liquid equivalent; however, such excise tax shall be levied only once.
Code of Virginia § 3.1-796.11:4 defines "handler" as:
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- [A]ny person who operates a grading station, a packer, huckster, distributor or other person who purchases, sells, or handles eggs that are used at the wholesale level for consumption in Virginia or a farmer who packs, processes or otherwise performs the functions of a handler. The term "handler" includes any person in Virginia who purchases eggs, or the liquid equivalent thereof, from anyone other than a "registered handler" for use or consumption at wholesale in Virginia.
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- Code of Virginia § 3.1-796.11:4 further provides that:
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- Eggs shall be deemed to be "used" in Virginia if, at a Virginia location, they are incorporated into another product so as to lose their character as eggs. Eggs shall be deemed to be "consumed" in Virginia if they are actually consumed in Virginia or sold at a location in Virginia.
In view of this background, I will now address your specific questions.
1. Is the tax imposed on eggs purchased for use solely within Virginia?
Eggs are deemed to be "used" in Virginia if they are incorporated into a product at a Virginia location and lose their character as eggs. Such eggs purchased from a handler are subject to the tax. For example, a bakery is deemed to have used eggs or egg products that are purchased from a handler and incorporated into cakes, cookies, and similar items at a Virginia location. The handler, therefore, must collect the egg tax from the bakery and remit the tax to the department, even if the baked products will subsequently be shipped outside of Virginia.
Eggs are deemed "consumed" in Virginia when they are actually consumed in Virginia. For example, eggs sold to a restaurant that are actually eaten by the customers on the restaurant premises are considered consumed in Virginia by the restaurant. Additionally, eggs are deemed "consumed" when sold at a location in Virginia. For example, eggs sold to the customers of a retail grocery store located in Virginia are deemed "consumed" in Virginia by the grocery store.
2. Are eggs purchased from Virginia suppliers which are exported to another state for processing exempt?
Eggs purchased from a Virginia supplier and exported to another state for processing would be exempt from the tax as the eggs would neither be "used" nor "consumed" in Virginia.
3. Are the above eggs still exempt if after processing they are then sold to a grocery store in Virginia?
If the eggs indicated in Item 2 are purchased from a Virginia supplier by an out--of-state processing facility and incorporated into another product such that the eggs lose their character as eggs, the resulting product would not be subject to the egg tax when sold to a grocery store in Virginia. Consumption of the eggs occurred outside of Virginia.
If, at the out-of-state processing facility, the eggs purchased from the above Virginia supplier are processed into another egg product, such as dried egg yokes, liquid eggs, scrambled eggs for a frozen dinner, the eggs have not lost their character as eggs, and use has not occurred outside of Virginia. If the egg products are subsequently sold to a retail grocery store located in Virginia, then the processing facility is considered to be a handler of the egg products which are sold for consumption in Virginia. The processing facility, therefore, must register for the tax, collect the tax from the retail grocery store, and remit the tax to the department.
In the instance, however, where the out-of-state processing facility, as a handler, sells egg products tb a Virginia retail grocery store chain and ships the products to a centralized warehouse for distribution by the grocery store chain to its instate and out--of-state local retail stores, then the chain store is also considered to be the handler of the egg products. Consequently, the chain store must register for the tax, collect the tax on the egg products shipped to retail stores located in Virginia, and remit the tax to the department.
4. Does it matter that only egg whites or egg yolks are purchased?
Code of Virginia § 3.1-796.11:3 levies the Egg Excise Tax on the purchase or sale of eggs, liquid eggs, or liquid equivalents for use or consumption in Virginia. The Virginia Egg Council has provided the department a listing of processed egg products. Included in this list are eggs that are processed into egg whites and egg yolks. Processed egg whites and egg yolks, therefore, are subject to the tax.
5. May egg products be purchased exempt if consumed in the manufacturing process?
Egg products, which are incorporated into another product so as to lose their character as egg products or are consumed in the manufacturing process, are subject to the tax when the use or consumption occurs in Virginia. The handler who sells such products to the manufacturer must collect the tax and remit it to the department.
When eggs are used or consumed in the manufacturing process at a location outside of Virginia, then the tax is not applicable.
6. Is the purchase of eggs and sale of liquid egg products to a grocery store exempt based on it being other than a retail sale?
See the answer to Question 3.
7. Does it matter whether the grocery store entity that makes the purchase is a wholesaler who then resells to a retail subsidiary?
The egg tax is typically collected by the last wholesaler who sells eggs or egg products to a retailer located in Virginia or to any other person located in Virginia who is not a registered handler. A grocery store entity that is a wholesaler may purchase eggs or egg products from a handler exempt of the tax when such products will be resold to a retail subsidiary. In this case, the grocery store entity becomes a handler and must charge the tax on the sale of the eggs or egg products to the retail subsidiary.
See Question 3 for information on a retail subsidiary that has a centralized warehouse facility, which distributes eggs or egg products to its retail locations.
8. Does it matter that the invoice for the sale of the eggs or egg products be sent to another state where the entity, is based?
The Egg Excise Tax applies to eggs and egg products that are purchased or sold for use or consumption in Virginia, even if the handler forwards the invoice to another office of the customer located in another state.
I hope this response satisfactorily addresses the issues in your letter. Enclosed is Virginia Tax Bulletin 96-4, which clarifies the department's position of the treatment of the Virginia Egg Excise Tax. If there are further questions, please contact ****** at********* .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8227N
Rulings of the Tax Commissioner