Response
October 19, 1992
October
19, 1992
XXXXX
Re:
"Restaurant" Tax
Dear
XXXXX:
Your
request for an advisory opinion on whether the 1 percent restaurant tax applies
to charges incidental to the sale of food and beverages has been referred to
the Auditing Division for their analysis. Your request specified several types
of charges. Our response is jointly to the XXXXX and the XXXXX.
It
is the division staff recommendation that:
1. Utah Code Section 59-12-603(4) states that
this tax is to be collected and remitted in the same manner as the general
sales tax. If an incidental service is associated with the sale and serving of
food or beverages, it is subject to the restaurant tax. Therefore, setup
charges for drinks, such as corkage, would be subject to the restaurant tax.
A
separate charge for use of flowers and decorations or equipment rentals and the
sale of an ice carving is subject to sales tax, but not the 1 percent
restaurant tax. A required gratuity is also subject to the restaurant tax if it
does not qualify for exemption from sales tax. An exception would be that
separate charges for music and bartender labor are not subject to either tax.
2. Tax Bulletin 5-92, copy enclosed, discusses
the tax treatment of tips and gratuities. Tips or gratuities are subject to
sales and restaurant taxes unless they are passed on to the actual server or
pooled as explained in the bulletin. If management controls disbursement of
pooled tips, they are subject to the taxes. Control does not mean the mere
payment to the serving team because if a tip is on the patron's bill or credit
card charge slip, management would have to channel the money to the server. It
means if management determines how much goes to whom, the tips are taxable. To
be exempt from the taxes, the employees must jointly make that determination.
Obviously, if management retains any part of tips or gratuities, that part is
subject to the taxes.
3. The restaurant tax, including these
interpretations, became effective on July 1, 1991 in Salt Lake County.
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 Bill of rights are
attached. To arrange for Americans with Disabilities Act accommodations, please
contact the Tax Commission at (801) 530-6920, (801) 530-6077 or TDD (801)
530-6269 allowing three working days notice.
For
the Commission
Joe
B. Pacheco
Commissioner
State
of Utah
Utah
State Tax Commission
160
East Third South
Salt
Lake City, UT 84134
Dear
Commissioners:
In
various discussions with individuals on the Utah State Tax Commission staff,
the issue of charging the Tourist, Recreational, Cultural and Convention
Facilities Tax continues to be unclear, especially as it applies to items
associated with banquets. The issue appears to be a distinction between
"sales of prepared foods and beverages" as identified in Tax Bulletin
8-91, and what is understood to be the Commission's interpretation of applying
the tax to all items incidental to the preparation of food and beverage.
The
customer's interpretation is that the tax should be applied only to food and
beverage sales, and that only the sales tax would apply to the incidental
items, specifically the banquet gratuity. Many customers are now refusing to
pay the extra 1% on these items, leaving the provider of the banquet in the
position of losing business or paying the tax out of its own pocket.
With
this in mind, please issue an advisory opinion, in writing, detailing the
extent of the 1% tax and the date you will be making this interpretation
effective for the customer. Also, please address the issue of whether it would
make a difference in your interpretation if the service charge was wholly
passed on to the server or if a portion was controlled by policy of management,
as both practices are common in the industry.
Some
additional items that could be contained on a typical banquet billing that
might cause confusion include:
Flowers
and decorations
Equipment
rental (chairs, dance floor, audio visual)
Music
Bartender
labor
Ice
carvings
Corkage
Any
specific guidance in these areas would be welcome. Thank you for your assistance.
Sincerely,
XXXXX