Tax Type
Retail Sales and Use Tax
Description
Food and grocery items; Meal service charges
Topic
Taxability of Persons and Transactions
Date Issued
03-15-1999
March 15, 199
Re: Request for Ruling: Retail Sales and Use Tax
This will reply to your letter of January 7, 1999, in which you request a ruling on behalf of your client (the Club) regarding service charges.
FACTS
The Club operates a private club which serves food and beverages to its members. The Club imposes an automatic gratuity charge on all food and beverage sales. Its members pay 15 percent gratuity for a la carte service or 20 percent for banquet service. The gratuity charges appear on the member's monthly statement as "service charges.' Any adjustments to the gratuity charge due to the member's dissatisfaction with the service is at the discretion of the Club.
The Club changed its procedures and no longer distributes a portion of the gratuity charges to its employees. The Club seeks a ruling concerning the application of the sales and use tax to food and beverages. You ask if the response would change if the members believed that such charges are distributed to the Club's employees.
RULING
-
- Title 23 of the Virginia Administrative Code (VAC) 10-210-930(D) states that:
If the dealer adds an amount or flat percentage to the meal price, whether the amount is designated as a tip or as a service charge, the addition is a part of the sales price and is subject to the tax even if the amount or flat percentage is paid over in part or in whole by the dealer to employees.
- Title 23 of the Virginia Administrative Code (VAC) 10-210-930(D) states that:
Accordingly, the gratuity charges in this case are taxable, regardless that all or part of the charge may or may not be distributed to the Club's employees. The tax applies in either case.
If you have any questions regarding this ruling, please contact * * * * * in my Office of Tax Policy at * * * * *.
Sincerely,
Danny Payne
Tax Commissioner
Rulings of the Tax Commissioner