November
22, 1991 Response from Tax Commission
November
4, 1991 Letter from XXXXX of XXXXX
XXXXX
Re:
Sales Tax on Liquor
Dear
Mr. XXXXX:
This
letter is in response to your recent request for a Tax Commission ruling on how
to collect or apply sales tax on the sale of liquor, mixed drinks, set-ups or
wine.
The
Tax Commission policy is to refer such requests to the division most qualified
to analyze the request and make recommendations concerning it. As such, your
request was referred to the Tax Commission's Auditing Division for their
analysis and recommendations. The division's recommendations are as follows:
It
is true that the Department of Alcoholic Beverage Control has collected sales
tax as part of the sale of all its products and will not accept an exemption
certificate regardless of who the customer is. It is also true that the Tax
Commission has allowed taverns and clubs to sell drinks with tax included as
long as the customer is aware that tax is included. The customer notice could
be a sign displayed in the facility or a notice printed on the bar bill. The
bar bill should be separate from the bill for other items.
In
computing and reporting tax on sales of liquor which has previously been taxed,
the seller should reduce the total proceeds by the cost of the liquor sold, then
divide the tax out of the remainder. You then have the amount subject to sales
tax. The total proceeds are subject to the 1% tourism (restaurant) tax. An
example of the calculation follows:
Total
proceeds XXXXX
Less
cost of liquor sold XXXXX
Sale
of set-ups XXXXX
Taxable
amount (XXXXX + 1.0725) XXXXX
Tourism
tax (XXXXX X .01) XXXXX
Tourism
tax on cost (XXXXX) X .01) XXXXX
Sales
tax (XXXXX X .0625) XXXXX
XXXXX
Based
upon the facts presented in your letter, we are in agreement with the Auditing
Division's recommendations. Obviously, if there are deviations from these
facts, this opinion may be negated.
If
you do not agree with this determination, you may appeal to the Tax Commission
for a formal hearing. The results of that hearing would constitute a
declaratory judgment and be appealable to the Utah State Supreme Court. A
Notice of Appeal Rights and a copy of the Utah Taxpayer's Bill of Rights are
attached.
For
the Commission,
Joe
B. Pacheco
UTAH
STATE TAX COMMISSION
XXXXX,
Auditing
160
East 300 South
Salt
Lake City, UT 84134
Re:
Sales taxability of liquor and mixed drinks
Dear
Mr. XXXXX:
I
spoke with XXXXX, the afternoon of Nov. 1st, regarding the purchase of liquor
and the sale of liquor and mixed drinks. This is to request written
confirmation of that letter.
These
are the facts as I understand them:
Utah
laws and regulations require the collection of sales tax on the retail sale of
tangible personal property.
Property
sold for resale is not a retail sale and is therefore not taxable. The
Commission requires that an exemption certificate be given to the vendor; the
property is then purchased without tax but the subsequent retail sale is
taxable.
There
are no statutory or regulatory exceptions for liquor.
R865-19-2S
requires that sales taxes be separately stated on invoices and receipts.
The
Liquor Commission will not accept a resale certificate. The Liquor Commission
charges sales tax on all liquor sold, but includes it in a lump sum price for
the merchandise and does not separately state sales tax on the invoice or
receipt.
The
Tax Commission has a long-standing unwritten policy of allowing vendors to
include tax in the stated price of an item, as long as the receipt or invoice
clearly states that sales tax is included.
The
Tax Commission will not require the Liquor Commission to accept resale
certificates, and therefore has made exceptions from the normal handling of
sales tax. The Commission allows credit, for sales tax paid on the original
liquor purchase, against subsequent resales.
It
Is my understanding that our hotel is to compute sales tax in the following
manner:
1.
Receipts for liquor sales will include a statement that the charge for the
liquor, mixed drink, set-up, or wine includes tax.
2.
In computing and reporting total taxable sales, the hotel will subtract liquor
costs (all liquor is sold at cost as required by law). This net figure will
represent the sales price of the set-up including sales tax. The sales tax will
be factored out of this total to arrive at total taxable sales. This is
illustrated as follows:
Total
liquor, mixed drinks, set-ups and wine sales XXXXX
less:
liquor purchases or costs XXXXX
Gross
set-up sales amount XXXXX
Taxable amount computed (XXXXX divided by 1.0625) XXXXX
Sales tax
to be remitted (XXXXX X 0.0625) XXXXX
Gross
set-up amount Including tax XXXXX
I
will appreciate your assistance in confirming and clarifying position, and the
way XXXXX and its divisions are required to remit the tax in question.
Respectfully
yours,
XXXXX
Excise
Tax Manager
Telephone:XXXXX