Retail Sales and Use Tax
Services-professional or personal; Conference and event planning services
Taxability of Persons and Transactions
February 19, 1997
Re: Request for Ruling: Retail Sales and Use Tax
This is in reply to your request for a ruling regarding the application of the sales and use tax to ******** (the "Taxpayer"). I apologize for the department's failure to respond to your prior request.
The Taxpayer is a destination management company that specializes in conference and event planning services. The Taxpayer provides a wide range of products and services from hotel accommodations and meeting facilities, to tours and food service for corporate clients.
The Taxpayer was audited by the department and instructed to collect the sales tax from its clients on charges for certain products and services. In addition, the Taxpayer was instructed to pay the use tax on rentals of tangible personal property and subsequently collect the sales tax on such charges, including the mark-up fee, invoiced to the client.
The Taxpayer asserts that similar companies are not complying in this manner and requests a ruling on the proper tax application concerning its business operations. Additionally, the Taxpayer believes it has overpaid the tax on certain transactions and requests a refund of such tax.
Code of Virginia § 58.1-609.5(1) provides an exemption from the sales and use tax for "[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made...." Virginia Regulation (VR) 630-10-97.1 applies the "true object" test in determining whether a transaction involving both the rendering of services and the provision of tangible personal property constitutes an exempt service or a taxable retail sale.
According to the information presented, a client seeks the Taxpayer's expertise and creativity in planning a conference or special event and negotiating for various products and services in the development of such events. The true object of the transaction, in this instance, is the provision of a service. The Taxpayer is deemed to provide a nontaxable service and is not required to the collect the tax on the charge(s) made to its clients.
As a service provider, the Taxpayer is considered the user and consumer of all products and services provided in planning and developing events for its clients. The Taxpayer must pay tax to its vendors on all products and taxable services purchased based on the cost price or if the vendor does not charge the tax, the Taxpayer must accrue the use tax and remit it directly to the department.
Effective March 1, 1997, the Taxpayer should pay the tax on its purchases of products and taxable services in accordance with the policy set forth in this ruling. In regard to the refund request, the department will respond under separate letter.
I have enclosed copies of the statute and the regulation cited for your information. If you have additional questions, please contact ******* at ********.
Danny M. Payne