Did Virginia's reduced food tax rate apply to packaged bulk groceries sold to nursing homes, correctional facilities, hotels, and other businesses?

Subject

Food Tax Reduction Program; Food Stamp Act of 1977, 7 U.S.C. § 2012

Plain-English summary

Virginia applied the reduced 2.5% food sales tax rate then in effect to the distributor's packaged bulk groceries sold to nursing homes, correctional facilities, hotels, and other customers. The buyer did not have to be an individual.

The ruling tied "food for home consumption" to the federal Food Stamp Act definition. Most staple groceries and cold prepared foods qualified when packaged in a closed container, bag, or similar packaging and not sold hot or for immediate consumption.

The distributor sold frozen foods, fresh meat, fruits and vegetables, dairy products, and general groceries. On the stated facts, those products qualified for the reduced rate even when sold to businesses or institutions that did not present an exemption certificate.

What this means for you

• Product condition and packaging mattered more than whether the purchaser was a person or institution.
• Hot food and food sold for immediate consumption fell outside the rule described here.
• Institutional purchasers without exemption certificates could still receive the reduced food rate.
• The 2.5% rate was the historical rate in this ruling; verify today's Virginia food rate.

Common questions

Did food sold to a business count as food for home consumption? Yes, if it met the product, packaging, and consumption conditions.

Did complimentary hotel breakfast supplies qualify? The ruling included hotels among customers and found the stated food products eligible.

Were hot foods included? No. The ruling expressly excluded hot food from this treatment.

Citations and references

• Va. Code § 58.1-611.1.
• 7 U.S.C. § 2012.
• Virginia Tax Bulletins 99-11 (October 1, 1999) and 05-7 (May 31, 2005).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 07-137

Original ruling text

September 5, 2007

Re: Request for Ruling: Retail Sales and Use Tax

Dear *:

This will reply to your letter in which you request a ruling regarding the application of the reduced state sales tax rate to sales of food by * (the "Taxpayer). I apologize for the delay in responding to your correspondence.

FACTS

The Taxpayer is a foodservice distributor that sells bulk food products to various entities. The food items sold by the Taxpayer include packaged frozen foods, fresh meats, fresh and canned fruits and vegetables, dairy products and general line groceries. The Taxpayer's customers include nursing homes, correctional facilities and hotels that provide their guests with complimentary continental breakfast.

You request a ruling regarding the proper tax rate to apply to the Taxpayer's sales of food to its customers that do not present a certificate of exemption. Specifically, you ask what constitutes "food for home consumption" in reference to the reduced rate of tax applied to the purchase of food items.

RULING

The Food Tax Reduction Program set out in Virginia Code § 58.1-611.1 applies a reduced sales and use tax rate to sales of food purchased for home consumption as defined under the Food Stamp Act of 1977, 7 U.S.C. § 2012. This definition includes most staple grocery food items and cold prepared foods packaged for home consumption. The Food Stamp definition includes eligible foods that are packaged for home consumption or packaged for consumption away from the premises where such foods are sold or packaged on a "to go" basis. As such, for purposes of applying the Food Tax Reduction Program, any food (except hot food) that is packaged in a closed container, bag, or other similar packaging, and is not sold for immediate consumption falls in the category of eligible "food for home consumption." This applies regardless of whether the food is sold to an individual or a business.

Based on the information provided, the Taxpayer's food products are considered food for home consumption under the federal definition, and the sale of such items will qualify for the reduced sales tax rate. Therefore, the Taxpayer may make sales of such items to nursing homes, correctional facilities and other customers at the current reduced sales tax rate of 2.5%.

This ruling is based on the facts presented in your letter. Any change in facts or the introduction of new facts may lead to a different result.

The Food Tax Reduction Program is explained in Virginia Tax Bulletins 99-11 (10/1/99) and 05-7 (5/31/05). The Code of Virginia section and the Tax Bulletins cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department of Taxation's web site. If you have additional questions, you may contact * in the Office of Policy and Administration, Appeals and Rulings, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-966525908T