Did Virginia sales tax apply to a nonprofit's event tickets when the ticket price included a catered meal?

Subject

Assessed tax to the sale of tickets that include the provision of catered meals

Plain-English summary

Virginia upheld sales tax on the full price of a nonprofit membership organization's event tickets because each ticket included a catered meal. Admission charges alone can be exempt, but a cover or ticket charge that includes food becomes a taxable sale of property.

The organization's claim that entertainment or business was the event's primary purpose did not change the result. The catered meal was included in the ticket price, so the entire charge fell within taxable sales price.

Virginia allowed 45 days for the organization to document any sales tax it had paid to caterers and other vendors for the events. Any audit credit was limited to the assessed tax; without documentation, the assessment remained unchanged.

What this means for you

• A nonprofit's status did not exempt these meal-included ticket sales.
• Admission bundled with a meal can make the entire ticket price taxable.
• The event's main entertainment or business purpose did not override the included food.
• Keep vendor invoices and proof of tax payment to support any audit credit.

Common questions

Q: Would admission without a meal have been taxable?
A: The cited admissions rule generally excludes admission charges, but this ticket also entitled the holder to food.

Q: Why was the full ticket price taxed?
A: The meal was part of the undivided ticket charge, bringing the entire amount into taxable sales price.

Q: Could vendor tax payments reduce the assessment?
A: Yes, if documented within 45 days, but only up to the assessed amount.

Citations and references

• Va. Code § 58.1-602.
• 23 VAC 10-210-930 and 23 VAC 10-210-30.
• P.D. 02-77 (May 2, 2002).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 08-76

Original ruling text

June 6, 2008

Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *:

This is in response to your letter in which you seek correction of the retail sales and use tax audit assessment issued to * (the "Taxpayer") for the period October 2003 through September 2006. I apologize for the delay in responding to your correspondence.

FACTS

The Taxpayer is a nonprofit membership corporation. As a result of the Department's audit, the Taxpayer was assessed tax and interest on the sale of event tickets to members that include catered meals. The Taxpayer contests the assessment on the basis that the primary purpose of the events is not the provision of a catered meal, but rather for entertainment or business purposes. In addition, the Taxpayer claims that it paid tax to its vendors for the taxable goods and services purchased for such events. The Taxpayer has paid the assessment and seeks a refund of the tax and interest paid.

DETERMINATION

Event Tickets

Title 23 of the Virginia Administrative Code (VAC) 10-210-930 states, "Retail sales of meals by restaurants, hotels, motels, clubs, caterers, cafes and others are taxable. Cover, minimum and room service charges in connection with the provision of meals are a part of the sales price and are taxable."

Title 23 VAC 10-210-30 addresses admissions and states:

The tax does not apply to sales of tickets, fees, charges, or voluntary contributions for admissions to places of amusement, entertainment, exhibition, display, or athletic contests, nor to charges made for participation in games or amusement activities. However "cover charges" or "minimum charges" which include the provision of or the entitlement to food, drinks, or other tangible property constitute a sale of property and are subject to the tax ....

In this case, the Taxpayer sponsored three events. The event tickets sold to members included the provision of a catered meal. Although the sales tax does not apply to admissions, in this case the admission is provided in conjunction with a taxable meal. The fact that the primary purpose of the events may not be the catered meal does not alter the fact that the ticket price includes the provision of a taxable meal.

Virginia Code § 58.1-602 defines "sales price" to mean the "total amount for which tangible personal property or services are sold . . . ." Based on the definition of "sales price," the total charge for the ticket which includes the provision of a catered meal is taxable. Accordingly, the auditor was correct in assessing the tax to the sale of tickets that include the provision of catered meals. This is consistent with the Department's policy set out in Public Document 02-77 (5/2/02). In that case, the Tax Commissioner upheld the assessment of the tax on theatre admission charges when such charges were combined with the charge for a meal.

Tax Paid to Vendors

According to the auditor, the majority of the caterers from whom the meals were purchased were either not registered with the Department for the collection of the sales tax or failed to charge the tax on the invoice. The auditor did not tax untaxed food purchases where the sale was taxed.

While the Taxpayer claims that it paid the sales tax to vendors for the taxable goods and services purchased for the contested sales of tickets to the above events, the Taxpayer has not provided any documentation to substantiate its claim. For purposes of this audit only, if the Taxpayer can produce documentation that the tax was paid on goods and services provided in connection with the events, I will allow credit in the audit for the tax paid. The credit will be limited to the amount of the assessed tax. Absent such evidence, there is no basis to revise the Department's audit.

CONCLUSION

Based on the above determination, the assessment of tax on the sale of event tickets is correct. I will allow the Taxpayer 45 days from the date of this letter to furnish documentation to the auditor to substantiate sales tax paid to vendors in connection with the contested issue. If the Taxpayer does not furnish all required documentation within the time allowed, it will be presumed that no additional information will be provided.

The Code of Virginia section, regulations and public document cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this determination, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-1406803288.T