Tax Type
Retail Sales and Use Tax
Description
Permission to include the tax in the sales price
Topic
Collection of Tax
Taxability of Persons and Transactions
Date Issued
07-07-1987
July 7, 1987
Re: Ruling Request/ Sales and Use Tax
Dear ****************
This will reply to your letter of April 2, 1987 seeking permission to include the tax in the sales price of items listed ************* (taxpayer's) menu.
Section 58.1-625 of the Code of Virginia sets forth the general rule that the sales and use tax be paid by the dealer, and that "the dealer...separately state the amount of the tax and add such tax to the sales price or charge." §58.1-628 of the Code then provides for a bracket system for the collection and reporting of the tax by all registered dealers.
However, §58.1-614(D) of the Code 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 it may be authorized to remit an amount based on a percentage of gross receipts which takes into account the inclusion of the sales tax.
Based on all the facts and circumstances presented and subject to the following conditions, permission is hereby granted for the taxpayer to include the tax in its menu item prices.
The taxpayer's menu's must contain a statement that the sales tax is included in the cost of its meals. In addition, the taxpayer's customer checks should contain a similar statement.
It should be noted further that this permission applies only to the retail sales and use tax and has no application to any local restaurant or meal tax. It is our understanding that the taxpayer's locality does impose a 4% local meal tax. Therefore, the taxpayer will have to seek separate permission from its locality to include the local meal and beverage tax in its menu item prices.
FORMULA FOR REPORTING THE TAX
Based on the current sales and use tax rate of 4 1/2%. if the taxpayer's locality does not grant it permission to include the local meal tax in its menu item prices. to derive the amount of sales tax which must be remitted to the department. the taxpayer should divide its total receipts for the period, inclusive of the sales tax collected but exclusive of any local meal tax collected, by a factor of 1.045. However, based on the same current 4 1/2% sales and use tax rate, if the taxpayer's locality grants it permission to include the local meal tax in its menu item prices, and if such meal tax rate is equal to 4%, to derive the amount of sales tax which must be remitted to the department, the taxpayer should divide its total receipts, inclusive of the sales and use tax and local meal tax collected. by a factor of 1.085.
This ruling is strictly limited to the facts presented and does not extend to other dealers whose operations are not identical to those presented by the taxpayer in this case.
I hope this has responded to your question but let me know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner