Tax Type
Retail Sales and Use Tax
Description
Deficiency assessments, sales tax for an alcoholic beverage served with or without food
Topic
Collection of Delinquent Tax
Records/Returns/Payments
Date Issued
06-18-1999
June 18, 1999
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear***
In your letter of March 25, 1999, you seek correction of the retail sales and use tax audit assessment issued to ***** trading as ***** (the "Taxpayer').
FACTS
It is my understanding that the Taxpayer was organized as a limited liability company and has closed its restaurant business since the conclusion of the audit. An audit of the period August 1997 through December 1998 resulted in the assessment of sales tax on untaxed alcoholic beverage sales and of use tax on untaxed purchases of tangible personal property used in the restaurant, based on an estimate that 28% of the total lease payments for the restaurant constituted tangible personal property.
The Taxpayer takes exception to the entire assessment. The Taxpayer claims that it was told by a representative from the Department of Alcoholic Beverage Control that sales of alcohol without food are not taxable and was therefore unaware that the sales tax applied. The Taxpayer also maintains that it did not own, lease, or rent any of the equipment assessed in the audit. Rather, it claims that most of the equipment used in the Taxpayer's operation was owned by two members of the Taxpayer.
DETERMINATION
Alcohol sales. Title 23 of the Virginia Administrative Code (VAC) 10-210-110 sets out the department's longstanding policy on alcoholic beverage sales as follows:
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- Alcoholic beverages sold by the Virginia Alcoholic Beverage Control Board (now the "Department of Alcoholic Beverage Control') through its government stores are subject to the Virginia Retail Sales and Use Tax Act. The sales and use tax applies to all retail sales of alcoholic beverages of every kind by every dealer. This includes sales of beer, wine, mixed beverages, etc. In each case the tax is computed on the total amount charged the customer by the dealer without deduction for excise or other taxes borne by the beverages. [Insert and emphasis added.]
- Alcoholic beverages sold by the Virginia Alcoholic Beverage Control Board (now the "Department of Alcoholic Beverage Control') through its government stores are subject to the Virginia Retail Sales and Use Tax Act. The sales and use tax applies to all retail sales of alcoholic beverages of every kind by every dealer. This includes sales of beer, wine, mixed beverages, etc. In each case the tax is computed on the total amount charged the customer by the dealer without deduction for excise or other taxes borne by the beverages. [Insert and emphasis added.]
I must note that the Department of Alcoholic Beverage Control does not administer the retail sales and use tax. Rather, the Department of Taxation has always administered such tax and is the sole state agency to be contacted for questions about this tax. Unfortunately, reliance on advice given by a representative of another state agency not charged with the administration of the retail sales and use tax is misplaced and is not a basis for relief from a tax liability which is properly due. Accordingly, I find no basis for revision of the audit on this issue.
Equipment. Based on the documentation presented, I find no basis to revise the use tax portion of the audit. The documentation presented and claims asserted do not provide convincing evidence of ownership of the equipment used in the Taxpayer's operation. It should be possible to provide purchase invoices or accounting records to establish the ownership of the equipment at issue. Without convincing evidence to establish the Taxpayer's members as owners of the equipment and that such equipment was freely lent to the Taxpayer, I must assume that the equipment was owned, leased or rented by the Taxpayer for a consideration.
I will, however, allow the Taxpayer a final opportunity to provide additional documentation to establish (1) the ownership of the equipment at issue and (2) that no consideration was provided by the Taxpayer for use of the equipment. The requested information should be forwarded to the attention of the auditor, *****, at the department's ***** District Office ***** Virginia *****, within 45 days of the date of this letter. The auditor will determine whether any new documentation to be furnished is sufficient to warrant a revision of the equipment portion of the audit.
As a minimum, the Taxpayer must immediately remit ***** to the ***** department's ***** District Office to satisfy the sales tax portion of the assessment (i.e., the sales tax and interest assessed on the alcoholic beverage sales). However, if the Taxpayer has no new documentation to provide for the equipment issue or cannot furnish it within the allotted time, then the Taxpayer must immediately remit payment of the entire audit liability of *****.
If you have any questions about this response, please contact ***** of my tax policy staff at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/22041R
Rulings of the Tax Commissioner