Tax Type
Retail Sales and Use Tax
Description
Application of sales and use tax; Site fees
Topic
Taxability of Persons and Transactions
Date Issued
09-17-1997
September 17, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear************
This is in reply to your letter of May 29, 1997 in which you seek correction of sales and use tax assessed to your client, ***** (the "Taxpayer"), for the period January 1994 through December 1996.
FACTS
The Taxpayer provides catering services. As a result of the department's audit, the Taxpayer disputes the tax assessed in three areas: (1) separately stated delivery charges; (2) equipment rentals/floral purchases; and (3) site fees.
DETERMINATION
Delivery Charges
The Taxpayer rents equipment for use at catered events that is delivered by the vendor to the event site. The auditor assessed tax on the equipment rental charges taken from the Taxpayer's general ledger accounts. The Taxpayer disputes the auditor's use of the general ledger amounts because they include delivery charges which are separately stated on the actual invoices from the vendor. The Taxpayer provides an estimate of the delivery charges that should be removed from the audit.
Code of Virginia § 58.1-609.5(3) provides an exemption from the sales and use tax for transportation charges separately stated. While the Taxpayer has provided an estimate of exempt delivery charges, no documentation has been submitted to verify this amount. However, I will instruct the auditor to review the invoices from the equipment rental vendor and remove the tax attributable to separately stated delivery charges.
Equipment Rentals/Floral Purchases
The Taxpayer believes equipment rentals and purchases of floral arrangements qualify as exempt purchases for resale. The Taxpayer asserts that it acts as a middleman with respect to these transactions and the items are obtained at the request of its customers.
The department has consistently held that caterers, similar to restaurants, may not purchase items used for preparing and serving food, including dinnerware, tables, linens, and similar items, exempt of the tax under a Resale Exemption Certificate. See Public Document (P.D.) 89-167 (5/22/89), copy enclosed. In addition, Virginia Tax Bulletin 92-10 explains in detail the application of the tax to tangible personal property used in the rendition of catering services, copy enclosed.
The same principles apply to floral arrangements purchased by caterers and provided in connection with catering services. Because the application of the tax is clear and well established, there is no basis to remove these items from the audit. See P.D. 93-33 (2/24/93) and P.D. 94-251 (8/12/94), copies enclosed.
Site Fees
The Taxpayer, on occasion, rents a location on behalf of its customer for holding a catered event. The Taxpayer pays a site fee which is passed on to the customer through the Taxpayer's billing. The Taxpayer contends that a sale does not occur and the sales tax does not apply.
"Sale" is defined in Code of Virginia § 58.1-602 to mean "any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property and any rendition of a taxable service for a consideration...." A sale does not occur when site fees are paid as described above because there is no exchange of tangible personal property.
The tax is due on the total charge to the customer for catering services, including site fees passed through to the customer. According to the audit work papers, the Taxpayer properly collected the tax on charges for catering services from its customers. Therefore, the tax assessed on the site fees will be removed from the audit.
The Taxpayer will be contacted by the auditor within 30 days to revise the audit as discussed in this letter. If you have questions concerning the policy as stated, you may contact ******** at ******Question regarding the audit revisions should be directed to***************at**************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12596J
Rulings of the Tax Commissioner