My airline buys food and beverages from a caterer to serve passengers for free during flights -- does our common-carrier sales tax exemption cover those purchases?

Plain-English summary

This ruling confirms a long-standing rule: an airline's sales tax exemption for its common-carrier operations does not stretch to cover the food it hands out to passengers.

An airline operating scheduled service into Virginia contracted with an in-flight catering company to supply meals, snacks, and beverages for its flights; the caterer charged the airline sales tax on those purchases. The airline asked the Department to confirm that its status as a common carrier with regularly scheduled Virginia service exempted these purchases from tax.

The Department said no. Virginia's exemption for airlines covers only property "used or consumed by such airline directly in the rendition of its common carrier service" -- meaning property actually used to transport passengers, like the aircraft itself and its operating equipment. Food and beverages served to passengers don't meet that test. The Department's regulations specifically say meals furnished to passengers aren't used directly by the airline in its transportation service, and the tax applies to meals delivered to any carrier (airline, railroad, steamship, etc.) to be furnished to passengers without a specific charge, wherever served. The Department also pointed to a 1978 Virginia Supreme Court decision holding that in-flight meals are a competitive amenity and ordinary operating expense of air travel, not an item "used immediately and principally" to transport passengers -- reinforced by the facts that meals aren't served on every flight (only during normal meal-time hours), fares don't change based on whether a meal is included, and passengers have no ability to select or separately pay for their meal (which also rules out treating the purchase as an exempt purchase for resale).

What this means for you

Airlines and other common carriers purchasing food and beverages for passengers

Don't assume your carrier exemption covers everything you buy to run your operation. It's limited to property used directly in actually transporting passengers -- meals, snacks, and beverages served to passengers are treated as a business amenity/operating expense, not transportation equipment, and remain taxable regardless of whether you charge passengers separately for them.

Any transportation company (railroad, Pullman car, steamship, airline) that furnishes meals to passengers

The same rule applies across modes of transportation: meals delivered to a carrier to be furnished to passengers without a specific charge are taxable, no matter where they're actually served.

Accountants and tax professionals advising transportation companies

This ruling is a clean, citable confirmation of Commonwealth v. United Airlines and its "commercial amenity" framing, applied again decades later to an unnamed airline's in-flight catering purchases -- useful shorthand for why carrier exemptions don't cover passenger amenities generally.

Common questions

Q: Does an airline's common-carrier sales tax exemption cover the food and drinks it serves passengers?
A: No. The exemption only covers property used directly to transport passengers. Meals, snacks, and beverages are treated as a competitive amenity and operating expense, not transportation equipment, and remain taxable.

Q: Does it matter that passengers aren't charged separately for their meal?
A: No -- Virginia's regulations specifically tax meals furnished to passengers without a specific charge, regardless of where they're served.

Q: Could an airline argue it's exempt because it's purchasing the meals for resale to passengers?
A: Not under this ruling's facts -- since passengers can't choose their meal or pay a specific price for it, there's no genuine "resale," so a resale exemption doesn't apply either.

Citations and references

• Va. Code § 58.1-609.3 6 (sales and use tax exemption for property used directly by an airline common carrier in the rendition of its service)
• Title 23 VAC 10-210-100 (meals, snacks, and beverages furnished to passengers are not used directly by the airline in its common carrier service, and are taxable)
• Title 23 VAC 10-210-930 A (tax applies to meals delivered to a carrier to be furnished to passengers without a specific charge, regardless of where served)
• Commonwealth of Virginia v. United Airlines Inc., 219 Va. 374, 248 S.E.2d 124 (1978) (in-flight meals are a commercial amenity/operating expense, not property used directly in common carrier transportation)
• P.D. 01-97; P.D. 94-314 (related prior Department rulings on the common carrier exemption)

Subject

Airline Exemption : Common Carrier -Taxability of meals/snacks/beverages furnished by airline without specific charge to passengers; Meals - Food furnished to passengers

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 22-27

Original ruling text

February 15, 2022

Re: Request for Ruling: Retail Sales and Use Tax

Dear *:

This is in response to your letter submitted on behalf of * (the “Taxpayer”), requesting a ruling on the application of the retail sales and use tax to purchases made from an in-flight catering company. I apologize for the delay in responding to your correspondence.

FACTS

The Taxpayer is an airline operating as a common carrier in interstate and foreign commerce. The Taxpayer has a contract with an in-flight catering company (the “Vendor”) to provide food and beverages for in-flight service. The Vendor applies sales tax on the food and beverages the Taxpayer purchases for its passengers. The Taxpayer is inquiring as to the application of tax on the food items purchased from the Vendor to be served to passengers on flights. The Taxpayer argues that its purchase of food items is exempt because of its status as a common carrier with regularly scheduled daily flights in the Commonwealth.

RULING

Virginia Code § 58.1-609.3 6 sets out the retail sales and use tax exemption afforded to airlines operating in interstate and foreign commerce, providing an exemption for the following:

Tangible personal property sold or leased to an airline operating in intrastate, interstate, or foreign commerce as a common carrier providing scheduled air service on a continuing basis to one or more Virginia airports at least one day per week, for use or consumption by such airline directly in the rendition of its common carrier service . [Emphasis added.]

Title 23 of the Virginia Administrative Code (VAC) 10-210-100 interprets the exemption statute and provides, in part, that meals, snacks and beverages furnished by an airline to passengers or others are not used or consumed by the airline directly in the rendition of its common carrier service. Therefore, such items are subject to the tax . Additionally, Title 23 VAC 10-210-930 A states:

The tax applies to the sale of meals and other tangible personal property by railroad, Pullman car, steamship, airline , or other transportation companies while operating in Virginia. The tax applies to meals delivered to carriers in this state to be furnished without a specific charge to passengers regardless of where served.

The Department’s policy with regard to airlines operating in interstate and foreign commerce is guided by the Virginia Supreme Court’s decision in Commonwealth of Virginia v. United Airlines Inc. , 219 Va. 374, 248 S.E.2d 124 (1978) (hereinafter “ United Airlines ”). In United Airlines , the Virginia Supreme Court ruled that food and related items served to passengers during flights were considered amenities and an operating expense that is necessary in the competitive field of air transportation, stating:

[T]he 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 cannot be considered essential tangible personal property ‘used immediately and principally’… to transport passengers by air in its role as a common carrier.

The Virginia Supreme Court supported this position by finding that food and related items were not served on all flights, but only on flights that occurred during normal meal hours, and the airlines fares on identical flights were the same whether or not the provisions of a meal were included. The Court also noted that, there was no merit to the argument that the items were purchased exempt for resale as the passenger could not choose the meal, nor the price paid for the meal during the flight. Thus, the Court concluded, food and related items are not considered to be used directly by an airline operating in interstate commerce in the rendition of its common carrier service.

The Taxpayer’s argument that the sales and use tax exemption provided to airlines for purchases used or consumed by the airline should extend to the purchase of all items because of its scheduled air service is incorrect. The exemption set forth in Virginia Code § 58.1-609.3 6 does not apply to the purchase of food and related items served to passengers during flights, as discussed above. Accordingly, purchases of these items do not qualify for the exemption provided in Virginia Code § 58.1-609.3 6 and are subject to tax.

This response is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.

The Code of Virginia section and regulation cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s web site. If you have any questions about this response, you may contact * in the Department’s Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/3492J

Related Documents

01-97

94-314