Tax Type
Retail Sales and Use Tax
Description
Food and grocery items; delinquent tax; Audit procedures;
Topic
Taxability of Persons and Transactions
Date Issued
04-18-1997
April 18, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Taxpayers:****************
Dear********************
In your letter of March 3, 1997, you seek correction of the sales and use tax
assessments issued to the Taxpayers referenced above.
FACTS
The Taxpayers own and operate fast food restaurants. An audit was conducted of seventeen stores for the periods August 1992 through July 1995, July 1991 through July 1995, and April 1995 through July 1995. As a result of the audit, use tax was assessed on untaxed purchases used or consumed by the Taxpayers in their operations. For one store, sales tax was assessed on unreported sales occurring during the first few months of its operation.
It is my understanding that you have expressed a concern that sales or use tax has been assessed in connection with free coffee refills and senior coffees. Coffee refills are provided at no additional charge to those customers who have paid for the initial cup of coffee. Also, seniors who purchase a meal are provided with coffee at no additional charge.
DETERMINATION
Based on the facts presented, coffee refills and senior coffees are only provided in connection with the sale of tangible personal property. It is my understanding that the Taxpayers charge and collect the sales tax on sales of coffee beverages and on the meals sold to seniors. Since these transactions are taxed initially and include the provision of either free coffee refills or free coffee, no additional sales or use tax is due on such refills or senior coffees.
According to the auditor, the only promotional items taxed in the audit were for untaxed items given away as a result of promotional games or free coupons furnished to doctors' offices or others. The auditor informs me that coffee is not accounted for with the promotional items. Instead, coffee used in making coffee refills and senior coffees is accounted for by a separate coffee inventory. Accordingly, the calculation used to compute the taxable giveaways does not include the cost of coffee. The auditor did not assess sales or use tax in connection with free coffee refills and senior coffees.
The burden of proof is upon the Taxpayers to show that the assessment is erroneous. Based on all of the facts presented and absent evidence to the contrary, l find no evidence to support a conclusion that tax was assessed on coffee refills or senior coffees.
Although the Taxpayers have paid all of the tax liabilities and most of the penalties assessed in this matter, there is an outstanding balance of **** consisting of**** in penalty and **** in interest.
To preclude further interest charges, please send payment of******* to the attention of ******* at the Department of Taxation, Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218-1880, within the next 30 days. Upon receipt of such payment, it will be applied as payment in full of the sixteen outstanding assessments.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12373R
Rulings of the Tax Commissioner