Tax Type
Retail Sales and Use Tax
Description
Utilities; Fuel for domestic consumption; Exemption from sales and use taxes
Topic
Taxability of Persons and Transactions
Date Issued
03-28-1997
March 28, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear****************
This will reply to your letter in which you seek correction of an assessment issued to ********** (the "Taxpayer") for the period January 1993 through December 1995.
FACTS
The Taxpayer is a barbecue restaurant that was audited and assessed use tax on its purchases of oak and hickory firewood used to cook the barbecue. The Taxpayer maintains that the purchase of the firewood is exempt from sales and use tax because the burning wood gives the barbecue a smoky flavor which is essential for the barbecue's unique taste. The Taxpayer also states that the recipe for cooking the barbecue requires the use of hickory and oak firewood. The Taxpayer suggests that a cheaper source of fuel would be used to cook the barbecue if the firewood was primarily used as fuel for cooking the barbecue.
DETERMINATION
The department's auditor held the firewood purchases taxable based on Title 23 VAC 10-210-630 (copy enclosed). Code of Virginia § 58.1-609.10(1), which is interpreted by VAC 10-210-630, provides an exemption from sales and use tax for "[a]rtificial or propane gas, firewood, coal or home heating oil used for domestic consumption." This section defines "domestic consumption" as the use of artificial or propane gas, firewood, coal or home heating oil by an individual purchaser for other than business, commercial or industrial purposes." (Emphasis added).
The Taxpayer uses the firewood as the fuel source for cooking the barbecue. Because the Taxpayer's use of the firewood is not considered "domestic consumption" as defined by law, the sales and use tax would apply to the purchases of firewood.
In support of your position that the firewood is primarily used to flavor the product, you point out that it would be more cost-effective to use other sources of fuel to cook the barbecue. While I agree that the Taxpayer's use of the firewood to cook the barbecue is essential for its flavor, the barbecue's flavor is of no consequence if the barbecue has not been cooked. For this reason, I cannot agree that the primary purpose for using the firewood is to flavor the barbecue. Without a statutory exemption in the Code of Virginia for business purchases of firewood used to cook and flavor food, there is no basis for removing the firewood purchases from the audit.
While I am sympathetic with the Taxpayer's situation, I must conclude that the auditor correctly held the purchases of firewood taxable in the audit. The department's records indicate the Taxpayer has an outstanding balance from the audit assessment of******** consisting of two bills for ********* . I will allow you sixty days to submit payment before additional interest accrues on the outstanding balances. You may send your payment to ********* in the Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218-1880. If you have any questions, please contact
at ********** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11270S
Rulings of the Tax Commissioner