Tax Type
Retail Sales and Use Tax
Description
"Sales price'; Services
Topic
Taxpayers' Remedies
Date Issued
07-02-1985
July 2, 1985
RE: §58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of January 21, 1985 in which you submit an application for correction of sales tax assessed to ***** as the result of recent departmental audits.
FACTS
***** (Taxpayer) is engaged in providing food services to airlines at various Virginia airports. The taxpayer has collected the sales and use tax on food sold to airlines, but recent audits produced assessments for the taxpayer's failure to collect the tax on charges for certain services in connection with the sale of food.
The separately stated charges included in the department's audits include charges for washing and sanitizing airline-owned dining service equipment, delivering meals and airline-owned equipment to aircraft, packing and handling of liquor kits, the removal and disposal of garbage from aircraft, cleaning of trash and removal of equipment from inbound terminating flights (strip charges), and port fees (charges by airport authorities for the right to do business at a location). The taxpayer contests the addition of tax to such charges and requests relief from the assessments issued, contending that the services in question were not necessarily provided only when food was sold, that all serving equipment used was owned by airlines and not by the taxpayer, that the charges for the services were billed separately, and that the taxpayer does not itself serve to airline passenger the meals it provides to airlines.
DETERMINATION
§ 58.1-603 of the Code of Virginia imposes the sales tax upon the "sales price" of tangible personal property sold in the state. "Sales price" is defined in Virginia Code § 58.1-602.17 as:
The effect of the above two statutes is to include services provided in connection with a sale of tangible personal property in the base for computing the sales tax on the transaction.
In this case, the taxpayer provides a wide variety of services, some of which are connected with the sale of tangible personal property. Charges for washing and sanitizing airline-owned dining service equipment, removing and disposing of garbage from aircraft, and removing equipment and trash from inbound terminating flights (strip charges) are all services provided independent from the sale of tangible personal property. Therefore, these services are not subject to tax when separately stated from the sale of tangible personal property on customer's invoices since all of these services are rendered with respect to customer-owned property. Separately stated charges for the delivery to the purchaser of tangible personal property are excludable from the taxable sales price of the tangible personal property under the provisions of Virginia Code § 58.1-602.17. Thus, charges for the delivery of food and airline-owned dining equipment are not taxable in this case.
Charges for the packing and handling of airline liquor kits are subject to the tax when tangible personal property, such as alcoholic beverages, mixers, fruit slices, ice, cups, is provided to the taxpayer's customers. Of course, liquor kit items that will actually be resold (as opposed to soft drinks, coffee, etc. that are often provided gratuitously to customers) may be purchased exclusive of the tax by airlines provided that the taxpayer is furnished with a resale exemption certificate.
Lastly, I must conclude that port fees charged to customers are includable in the sales price of taxable tangible personal property and services in the same manner as any or tax or fee passed on to customers. Of course, port fees added to the cost of nontaxable services are likewise not subject to tax.
Based upon the foregoing, charges for the washing and sanitizing of airline-owned dining service equipment, the removal and disposal of garbage from aircraft, and the removal of equipment and trash from inbound terminating flights (strip charges) will be removed from the department's audits. In addition, the department's audits will be revised to delete any port fees charged to airlines that were not in conjunction with the sale of tangible personal property provided that appropriate information is provided to the department's Technical Services Section at P. O. Box 6-L, Richmond, Virginia 23282 within thirty days. Lastly, while it does not readily appear that such charges were included in the department's audits, revisions will be permitted if information is presented to show that liquor kit packing and handling charges not in conjunction with the sale of tangible personal property were included in the audits. Revisions will also be permitted if resale exemption certificates are produced for liquor kit packing and handling charges to airlines.
Sincerely,
W. H. Forst
Tax Commissioner
RE: §58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of January 21, 1985 in which you submit an application for correction of sales tax assessed to ***** as the result of recent departmental audits.
FACTS
***** (Taxpayer) is engaged in providing food services to airlines at various Virginia airports. The taxpayer has collected the sales and use tax on food sold to airlines, but recent audits produced assessments for the taxpayer's failure to collect the tax on charges for certain services in connection with the sale of food.
The separately stated charges included in the department's audits include charges for washing and sanitizing airline-owned dining service equipment, delivering meals and airline-owned equipment to aircraft, packing and handling of liquor kits, the removal and disposal of garbage from aircraft, cleaning of trash and removal of equipment from inbound terminating flights (strip charges), and port fees (charges by airport authorities for the right to do business at a location). The taxpayer contests the addition of tax to such charges and requests relief from the assessments issued, contending that the services in question were not necessarily provided only when food was sold, that all serving equipment used was owned by airlines and not by the taxpayer, that the charges for the services were billed separately, and that the taxpayer does not itself serve to airline passenger the meals it provides to airlines.
DETERMINATION
§ 58.1-603 of the Code of Virginia imposes the sales tax upon the "sales price" of tangible personal property sold in the state. "Sales price" is defined in Virginia Code § 58.1-602.17 as:
-
- ...the total amount for which tangible personal property or services are sold, including any services that are a part of the sale...(Emphasis added)
The effect of the above two statutes is to include services provided in connection with a sale of tangible personal property in the base for computing the sales tax on the transaction.
In this case, the taxpayer provides a wide variety of services, some of which are connected with the sale of tangible personal property. Charges for washing and sanitizing airline-owned dining service equipment, removing and disposing of garbage from aircraft, and removing equipment and trash from inbound terminating flights (strip charges) are all services provided independent from the sale of tangible personal property. Therefore, these services are not subject to tax when separately stated from the sale of tangible personal property on customer's invoices since all of these services are rendered with respect to customer-owned property. Separately stated charges for the delivery to the purchaser of tangible personal property are excludable from the taxable sales price of the tangible personal property under the provisions of Virginia Code § 58.1-602.17. Thus, charges for the delivery of food and airline-owned dining equipment are not taxable in this case.
Charges for the packing and handling of airline liquor kits are subject to the tax when tangible personal property, such as alcoholic beverages, mixers, fruit slices, ice, cups, is provided to the taxpayer's customers. Of course, liquor kit items that will actually be resold (as opposed to soft drinks, coffee, etc. that are often provided gratuitously to customers) may be purchased exclusive of the tax by airlines provided that the taxpayer is furnished with a resale exemption certificate.
Lastly, I must conclude that port fees charged to customers are includable in the sales price of taxable tangible personal property and services in the same manner as any or tax or fee passed on to customers. Of course, port fees added to the cost of nontaxable services are likewise not subject to tax.
Based upon the foregoing, charges for the washing and sanitizing of airline-owned dining service equipment, the removal and disposal of garbage from aircraft, and the removal of equipment and trash from inbound terminating flights (strip charges) will be removed from the department's audits. In addition, the department's audits will be revised to delete any port fees charged to airlines that were not in conjunction with the sale of tangible personal property provided that appropriate information is provided to the department's Technical Services Section at P. O. Box 6-L, Richmond, Virginia 23282 within thirty days. Lastly, while it does not readily appear that such charges were included in the department's audits, revisions will be permitted if information is presented to show that liquor kit packing and handling charges not in conjunction with the sale of tangible personal property were included in the audits. Revisions will also be permitted if resale exemption certificates are produced for liquor kit packing and handling charges to airlines.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner