Sales of Food and Beverages to and by Public Carriers

PURPOSE: Section 144.020.1(1), RSMo, taxes the retail sale of tangible personal property. This rule interprets the sales tax law as it applies to the sale of food and beverages to and by public carriers. (1) In general, the sales of food and beverages to public carriers are subject to tax unless the carrier charges a separate amount for the sale of these items to its passengers or crew. (2) Definition of Terms. (A) Airline—a person engaged in the carriage of persons or cargo for hire by commercial aircraft pursuant to the authority of the federal Civil Aeronautics Board, or successor thereof. (B) Missouri passenger miles—miles from airline flights that either land in or take off from locations in Missouri. (C) Public carrier—a person engaged in the business of transporting persons or cargo for hire for the use or benefit of all. (3) Basic Application of Tax. (A) Public carriers that purchase food and beverages in this state to be used in serving passengers and crew should pay tax on these items at the time of purchase, unless the public carrier separately charges for the sales of these items. (B) A public carrier may issue a resale exemption certificate to a seller of food and beverages if the public carrier sells the food and beverages to its passengers or crew and charges them a separately stated amount for these items. If a public carrier chooses this option, it is subject to tax on the gross receipts from all sales in this state of food or beverages to passengers or crew. (C) Federal statutes exempt Amtrak from state sales tax on the gross receipts from sales in this state to passengers or crew. (D) Airlines which purchase alcoholic beverages from wholesale distributors must remit tax of those beverages on the following basis: 1. On all sales made on the ground in this state, tax should be collected on the sales price of the drink; 2. The tax due on sales made in flight should be determined by multiplying the tax rate times the Missouri gross liquor revenues; and 3. The Missouri gross liquor revenues are the airline’s total gross liquor revenue times the percentage of Missouri passenger miles to total passenger miles. (E) Federal law, 49 U.S.C. 40116 (c), prohibits a state from taxing activities on flights that merely fly over a state without taking off or landing from an airport in the state. (4) Examples. (A) Cool Crowd Airlines is engaged in the business of transporting persons and cargo for hire and has operating facilities in this state where aircraft are furnished with food and beverages. Cool Crowd does not separately charge for sales of food and beverages to its passengers or crew and therefore must pay tax on the purchase of these items when they are delivered in this state. (B) Assume the same facts as in example one except that Cool Crowd does separately charge for sales of food and drink to passengers or crew. In this instance, Cool Crowd should issue a resale exemption certificate to its food and beverage vendors and purchase these items tax free. Cool Crowd should then collect and remit tax on all sales of food and beverages that occur in this state. (C) Cool Crowd Airlines purchases alcoholic beverages tax free for resale both in clubs located in this state and in flight. Cool Crowd should remit sales tax on the total gross receipts resulting from all sales made on the ground in this state. For sales occurring in flight, Cool Crowd should remit use tax on the Missouri gross liquor revenues. The Missouri gross liquor revenues are computed by multiplying the airline’s total gross liquor revenue times a fraction, the numerator of which is Missouri passenger miles and the denominator of which is total passenger miles. AUTHORITY: sections 144.270 and 144.705, RSMo 1994.* Original rule filed Nov. 10, 1999, effective May 30, 2000. *Original authority: 144.270, RSMo 1939, amended 1941, 1943, 1945, 1947, 1955, 1961; 144.705, RSMo 1959. Republic Airlines Inc. v. Wisconsin Department of Revenue, 159 Wis. 2d 247; 464 N.W. 2d 62: (Wisc. App. 1990). Republic reported tax on the gross receipts of food, beverages and peanuts based on a ratio of revenue passenger miles flown in Wisconsin (the numerator), to its revenue passenger miles everywhere (the denominator). The numerator included flights that landed in or took off from Wisconsin but did not include overflights. The Wisconsin Department of Revenue adjusted the numerator of this fraction upward to include overflights. The Wisconsin Court of Appeals ruled that the Wisconsin statute did not authorize the inclusion of flyover miles in the sales tax apportionment factor, even though such inclusion was authorized by the applicable regulation. The court determined that the Legislature’s use of the word “in” in the statute did not authorize the Revenue Department’s promulgation of a regulation including miles merely “over” the State in the apportionment factor.