87-30 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Alternative deduction for exempt food stamp and WIC program sales

Topic

Exemptions

Subtractions and Exclusions

Date Issued

02-20-1987

February 20, 1987

Re: Request for Ruling/Sales and Use Tax

Dear ***********************************

This will reply to your letter of November 26, 1986, in which you request use of an alternative method for computing your firm's sales tax deduction for exempt food stamp and WIC program sales.

It is my understanding that the cash registers utilized by your firm are unable to provide an exact accounting of exempt food stamp and WIC sales; therefore, your firm utilizes the second alternative approach set forth in Emergency Virginia Regulation 630-10-112 for the computation of exempt food stamp and WIC sales. Under this approach, a dealer is to account for the food stamps deposited during each month (with certain modifications), as well as the WIC drafts deposited during the month. Before computing the total exempt sales, however, the dealer must reduce the food stamp deposits by 2 percent to account for coin change returned to customers.

As noted in your letter, however, your firm's cash registers produce a total that equals food stamp deposits and WIC deposits. Thus, unless WIC sales can be removed from the total, the use of the second alternative method set out in VR 630-10-112 may result in the WIC sales also being reduced by 2 percent. As it is impractical to manually determine the amount of WIC sales at each store each month, you request permission to remove from the total subject to the 2 percent reduction a set percentage each month that will represent WIC sales. Based on a one month analysis of total food stamp and WIC sales at 10 of your firm's 83 Virginia stores, you suggest that the percentage representing WIC sales should be 16.66 percent.

Thus, using the approach outlined in your letter and assuming $100,000 in monthly food stamp and WIC deposits, your firm's deduction for such sales would be computed as follows:

- Total Food Stamp and WIC Deposits
  Less WIC Deposits (16.66 % of Total FS/WIC Sales)
  
  Less Coin Change Modification (2 % of FS Sales)
  
  Plus WIC Deposits (16.66 % of Total FS/WIC Sales)
  Total Food Stamp and WIC Exempt Sales

Based upon the factual situation outlined in your letter and the detailed analysis of food stamp and WIC sales performed, I authorize your firm to use this alternative approach. In addition, your firm may file amended returns for periods from October 1, 1986 onward to utilize this alternative approach. of course must note that this alternative method applies only to your firm and is in no way indicative of a change in policy from that set forth in VR 630-10-112.

If you have any further questions, please do not hesitate contact the department.

Sincerely,

W. H. Forst
Tax Commissioner

Rulings of the Tax Commissioner