Tax Type
Retail Sales and Use Tax
Description
Application of sales and use taxes; Gratuities; Cash register receipts
Topic
Taxability of Persons and Transactions
Date Issued
03-29-1995
March 29, 1995
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear*************
This will reply to your letter of August 9, 1994 in which you seek correction of a sales and use tax assessed to your client,********** (the "Taxpayer") for the period April 1991 through June 1994.
FACTS
The Taxpayer operates a restaurant and bar. As a result of the department's audit, an assessment was made on certain untaxed sales. The Taxpayer contests two issues raised in the audit, each of which will be addressed below.
DETERMINATION
Tax on Gratuities: Virginia Regulation (VR) 630-10-64(D) provides that [i]f a 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... n
The Taxpayer, in this case, imposes a flat gratuity charge in connection with its banquet sales. Furthermore, the Taxpayer does not advise its customers, in writing, that they have the option to change or delete the recommended amount of the gratuity. Based on the above, the assessed liability on gratuity charges is correct as assessed. I have enclosed P.D. 95-12 (01/23/95) and P.D. 92-192 (09/29/92) which further discuss this issue.
Sales Tax: Code of Virginia § 58.1-625 provides that a dealer is required to separately state the amount of the tax and add the tax to the sales price or charge. VR 630-10-24(A) further provides that "[i]dentification of the tax by a separate writing or symbol is not required provided that the amount of the tax is shown as a separate item on the record of the transaction." (Emphasis added).
The Taxpayer was held liable for the tax on the sales price of its alcoholic beverages. The taxpayer included the tax in the sales price of its alcoholic beverages but did not list the tax separately on the record of transaction (the cash register receipt). The tax was remitted based on a percentage of the gross receipts which took into account the inclusion of the sales tax. Based on the foregoing, the auditor correctly assessed the tax regarding this issue. Furthermore, I have enclosed P.D. 95-11 (11/19/95), a case which appears nearly identical to the Taxpayer's contested issues.
However, based on the information in your letter and under the provisions set forth in Code of Virginia §58.1-614(D) (copy enclosed), permission is hereby granted for the Taxpayer to include the tax in the beverage prices, prospectively from January 1, 1995. This permission applies only to the retail sales and use tax. The Taxpayer will have to seek separate permission from its locality to include the local meal and beverage tax in its menu item prices. See the enclosed P.D. 95-11 (01/19/95) for further instructions regarding price listings and the method to determine the amount of sales tax which must be remitted to the department.
A notice of assessment, with interest accrued through the date of your appeal, will shortly be issued. No additional interest will accrue on the outstanding assessment provided payment is made within 30 days. Please summit your check to the department's Office of Tax Policy, P.O. Box 1880, Richmond, Virginia 23282-1880.
If you have any questions regarding this determination, you may contact ******************.
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Sincerely,
Danny M. Payne
Tax Commissioner
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Rulings of the Tax Commissioner