Tax Type
Retail Sales and Use Tax
Description
Food and grocery items; Menu prices.
Topic
Taxability of Persons and Transactions
Date Issued
02-09-1998
February 9, 1998
Dear*******:
This will reply to your letter in which your seek correction of a sales and use tax assessment issued to ***** (the Taxpayer) for the period August 1994 through July 1997.
FACTS
The Taxpayer operates as a restaurant. The department's audit revealed that the Taxpayer included the tax in the sales price of its menu prices and remitted the tax based on a percentage of the gross receipts. The Taxpayer was assessed tax on the difference between the total amount of gross sales as reported by the cash register receipts and the total sales reported on its sales and use tax returns.
The Taxpayer contests the assessment and maintains that the method used to collect the sales tax is in compliance with Code of Virginia Sec. 58.1-614(D). The Taxpayer asserts that the only basis for the assessment is the fact that it did not first obtain permission from the Tax Commissioner to include the sales tax in the menu prices.
DETERMINATION
Under Code of Virginia Sec. 58.1-625, a dealer is required to separately state the amount of the tax and add the tax to the sales price or charge.
Title 23 of the Virginia Administrative Code 10-210-340(A) provides additional guidance on the above statutory requirement, explaining "[i]dentification of the tax by a separate writing or symbol is not required provided that the amount of the tax is shown as a separate item on the record of the transaction.' (Emphasis added).
The statute and the regulation clearly set forth the requirement that the tax must be separately stated and added to the price of goods sold at retail. When the Taxpayer included the tax in the sales price of meals but did not list the tax separately on the record of the transaction (the cash register receipt), it failed to meet this requirement. The department's policy regarding this issue has been addressed in a number of prior rulings, a sample of which is enclosed.
Virginia law allows the inclusion of the sales tax within the selling price only in very limited situations. Code of Virginia Sec. 58.1-614(D) provides that when a dealer is able to demonstrate to the satisfaction of the Tax Commissioner that it is impractical to collect the tax in accordance with the bracket system provided for in Code of Virginia Sec. 58.1-628, the taxpayer may be authorized to remit an amount based on a percentage of gross receipts which takes into account the inclusion of the sales tax. In this case, the Taxpayer did not have permission to account for the tax as specified above. Further, the Taxpayer has not demonstrated that it is impractical to collect the tax in accordance with the bracket system.
I apologize for any inappropriate procedures by the department's auditor during the audit; however, my review of the audit report indicates the assessment was computed based on established law and policy. Based on the information presented, there is no basis for revising the assessment. The Taxpayer will receive a revised assessment, with interest accrued to date. The assessment should be paid within 30 days to avoid the accrual of additional interest. If you have any questions regarding this determination, please contact ***** in the Office of Tax Policy at *****.
Rulings of the Tax Commissioner