Virginia – Foods Eligible for the Reduced Tax Rate

SALT Report 2935 – The Virginia Tax Commissioner issued a ruling regarding an assessment against a Taxpayer who operates a retail food establishment.  At issue in this case, are whether certain prepackaged deli trays and party platters that the Taxpayer’s customers order from a separate menu qualify for the reduced sales tax rate.

When a customer places an order from the menu, the Taxpayer will prepare, package, and sell the cold deli trays and party platters according to the customer’s specifications.  When the customer picks up its order, the Taxpayer charges the 2.5% reduced sales tax rate.

Subsequently, an auditor determined that sales of the trays and platters constituted the sale of catered food that is subject to the full 5% sales tax rate. The auditor issued an assessment for the difference between the reduced sales tax rate and the general sales tax rate. The Taxpayer disagreed with the assessment and filed an appeal with the Tax Commissioner.

In its response, the Commissioner referred to two prior tax bulletins, VTB 05-7 and VTB 99-11.  In these bulletins, the Commissioner stated that cold deli trays and party platters packaged in containers with lids or tops may be eligible for the reduced tax rate.   The items must be sold in either a single or multiple serving size and they must be packaged for home consumption.

Based on those tax bulletins and the fact that the Taxpayer does not actually provide catering services, the Commissioner ruled that the Taxpayer’s sales of prepackaged cold deli trays and party platters qualify for the reduced sales tax rate.  As a result, the assessment for unpaid sales tax and the statutorily imposed interest was abated in full.

For Further Information

Virginia Department of Taxation – Rulings of the Tax Commissioner #13-154