A South Carolina Administrative Law Judge (ALJ) recently ruled that a taxpayer who offered bartending services at customer events was selling tangible personal property at retail and therefore should have collected and remitted sales tax. The taxpayer offered a variety of beverage and bartending packages. Most of the packages included drinks (specified beer, wine, liquor and mixers), bartending services, and the provision of other tangible personal property such as ice, glassware, napkins, and table linens. The packages were normally priced per person attending the event, with the per-person price ranging based on the quality of the products provided (e.g., beer and wine only, call brands of liquor, premium brands of liquor). When booking an event, a customer paid a deposit to the taxpayer so that the taxpayer could purchase the inventory for the event. The taxpayer paid sales tax on all purchases. On audit, the Department determined that the taxpayer should have been collecting and remitting sales tax on sales of bartending packages.
Before the Administrative Law Court, the taxpayer argued that the true object of his business was the service of alcohol, not the sale of it, and that his clients retained his services because of his experience, professionalism, and responsibility. The ALJ, however, concluded that when the cost of a package consisting of alcohol and bartending services was provided for a lump sum, the true object was the purchase of alcohol. In reaching this conclusion, the ALJ noted that while the cost of the packages varied based on the quality of the alcohol served, the bartending services remained the same irrespective of the package chosen. In the ALJ’s view, this demonstrated that the provision of the service was incidental to the sale of tangible personal property. The ALJ also rejected the taxpayer’s position that the assessment would result in double taxation. Notably, the Department had credited the taxpayer for tax paid on his purchases. Finally, the ALJ waived all penalties because the issue at hand was a “complex issue where reasonable persons differ” and the taxpayer “made a sincere effort to operate according to the law.” The case was remanded to the Department to remove from the assessment any invoices where the bartending services were separately stated. For more information on this ruling, please contact Nicole Umpleby at 704-335-5586.
To view past weeks of TWIST that you may have missed, please visit our TWIST homepage.
To receive the TWIST e-mail each Monday, make sure that State and Local Tax is checked off as one of your topics of interest on the KPMG Tax subscription site.