Opinion ID: 1213419
Heading Depth: 1
Heading Rank: 1

Heading: Food and Related Items

Text: The Commonwealth argues that meals served by United to passengers during flights of its aircraft are not exempt under the provisions of Code | 58-441.6(u) because the food and related items were not used or consumed by United directly in rendition of its common carrier service; that the Department of Taxation's Rules and Regulations specifically state that food delivered to aircraft in this State is not exempt from sales and use taxes; and that the transfer of the food to United's passengers was not a resale exempted under Code | 58-441.2(c). On the other hand, United argues that food is exempt from taxation either because it is used directly in the rendition of its common carrier service or because the furnishing of meals to its passengers is a resale for a consideration; that the Rules and Regulations of the Tax Department are not entitled to any weight because they have been inconsistently applied by the Department; [2] and that the tax on food is a burden on interstate commerce in violation of the Federal Constitution. We do not agree with the trial court's holding that food was used by United directly in the rendition of its common carrier service and that United was exempt from the payment of sales and use taxes on food and its related items served to in-flight passengers. Section 1-7 of the Sales and Use Tax Rules and Regulations provides: Tangible personal property sold or leased to an airline operating in interstate or foreign commerce under a certificate of convenience and necessity issued by the Federal Civil Aeronautics Board or successor agency, for use or consumption by such airline directly in the rendition of its common carrier service, is not subject to the tax. The furnishing of meals by such an airline to passengers or others is not use or consumption of tangible personal property by the airline directly in the rendition of its common carrier service. Further as to meals, see | 1-64. (Emphasis in the original). Section 1-64 of the Regulations, in pertinent part, provides: The tax applies to the sale of meals or other tangible personal property by railroad, Pullman Car, steamship, airline, or other transportation companies operating in the State of Virginia. The tax applies to meals delivered to carriers in this State to be furnished without a specific charge therefor to passengers regardless of where served. The record shows that food and related items are not served on all United flights. Meals are served to passengers only when the time of those flights occurs around regular meal hours. The same fare is charged on flights between the same points even when food is not served. Under those circumstances, the service of food is considered a commercial amenity and an operating expense which is necessary in the competitive field of transportation by air. Thus, food and related items canot be considered essential tangible personal property used immediately and principally by United to transport passengers by air in its role as a common carrier. We do not believe that sections 1-7 and 1-64 of the Departments' Rules and Regulations are inconsistent with the provisions of | 58-441.6(u). Neither do we believe that the Department's refusal to exempt food, while exempting the motor vehicles used to load food on aircraft and carts used to serve the food to passengers (see note 2), creates such an inconsistently that we should accord the Rules and Regulations no weight. We agree with the trial court's holding, however, that the delivery by United of meals to its passengers was not a 'resale' in contemplation of Code | 58-441.2(c). Code | 58-441.2(c), in pertinent part, defines Retail sale or a sale at retail to mean a sale to a consumer or to any person for any purpose other than for resale in the form of tangible personal property or services taxable under this chapter,... provided, that sales for resale must be made in strict compliance with rules and regulations made under this chapter. In American Airlines, Inc., et al. The Department of Revenue, 58 Ill.2d 251, 319 N.E.2d 28 (1974), relief uponby the trial court, the Supreme Court of Illinois was presented with the identical issue and essentially the same facts as in the case at bar. There the court held that where a vendor sold food to the airline for service to its passengers on airline flights, the sale was a sale at retail for use and consumption by the airline; that the service of meals was not a resale to passengers within the statute because meals were not separately considered and charged for, but were treated as a commercial amenity and operating expense, necessary in the competitive field of air transportation; that there was no bargain as to the meal American would serve the passenger and the charge he would pay; that consideration within the meaning of the definition of sale at retail is consideration which was bargained for; and that American did not acquire the food from the vendor for resale to its passengers for a valuable consideration. The court also noted that American was essentially selling transportation by air, and that is what its passengers were purchasing. Undercofler Eastern Airlines, Inc., 221 Ga. 824, 147 S.E.2d 436 (1966); United Air Lines, Inc. Department of Treasury, (Cir.Ct. of Ingham County, Mich. No. 13967-C) leave to appeal denied, 389 Mich. 781 (1973); State Hertz Skycenter, Inc., 55 Ala. App. 481, 317 So.2d 319 (1975); and State Delta Air Lines, Inc., Ala. Civ. App., 356 So.2d 1205, cert. denied, 356 So.2d 1208 (1978) were relied upon by United. We do not find those cases persuasive. We hold that the service of food and related items by United to its passenger was not a resale in contemplation of Code | 58-441.2(c) and that United was not exempt from the payment of the taxes on that ground. There is no merit in United's argument that the sale tax assessed against it for the food purchased was prohibited as a burden on interstate commerce. Here United purchased and took delivery of the items in Virginia and the transaction was not in interstate commerce, even though the items were immediately taken out of Virginia for use outside the Commonwealth. The mere purchase of supplies or equipment for use inconducting a business which constitutes interstate commerce is not so identified with that commerce as to make the sale immune from a nondiscriminatoty tax imposed by the State upon intrastate dealers.... A nondiscriminatory tax upon local sales in such cases has never been regarded as imposing a diect burden upon interstate commerce.... Eastern Air Transport, Inc. South Carolina Tax. Comm., 285 U.S. 147, 153 (1932). See American Airlines, supra, 58 Ill.2d at 260, 319 N.E.2d at 33. See also United Air Lines, Inc. Mahin, 410 U.S. 623, 627-30 (1973).