Broadmoor Hotel, Inc. v. Department of Revenue, State of Colo.
| Decision Date | 06 April 1989 |
| Docket Number | No. 87CA1639,87CA1639 |
| Citation | 773 P.2d 627 |
| Parties | BROADMOOR HOTEL, INC., a Colorado corporation, Plaintiff-Appellee, v. The DEPARTMENT OF REVENUE, STATE of COLORADO; Alan H. Charnes, Executive Director, Defendants-Appellants. . I |
| Court | Colorado Court of Appeals |
Sherman & Howard, Ben S. Wendelken, Colorado Springs, for plaintiff-appellee.
Duane Woodard, Atty. Gen., Charles B. Howe, Chief Deputy Atty. Gen., Richard H. Forman, Sol. Gen., Steven M. Bush, Asst. Atty. Gen., Denver, for defendants-appellants.
The Department of Revenue (Department) and its executive director, appeal a district court judgment reversing its decision and entering a summary judgment in favor of plaintiff, Broadmoor Hotel, Inc. We reverse.
The Broadmoor is a resort hotel which operates eight bars on its premises. Some of these bars make available to their patrons complimentary snacks and hors d'oeuvres which are purchased by the Broadmoor at wholesale. The issues on appeal are 1) whether the purchase of these items is subject to a use tax, and if so, 2) whether the Broadmoor is exempt from the tax under § 39-26-203(1)(t), C.R.S. (1982 Repl.Vol. 16B).
The Department contends that the purchase of the snacks, under the facts of this case, was subject to a use tax. We agree.
Section 39-26-202, C.R.S. (1982 Repl.Vol. 16B) imposes a use tax for the "privilege of storing, using, or consuming in this state any articles of tangible personal property purchased at retail." The requirements for imposing the use tax are 1) tangible personal property; 2) purchased at retail; 3) without prior payment of a sales or use tax; and 4) use or consumption in Colorado. Tri-State Generation & Transmission Ass'n, Inc. v. Department of Revenue, 636 P.2d 1335 (Colo.App.1981).
The crucial issue here is whether the snacks were purchased by the Broadmoor "at retail." A purchase at retail is not one for resale. See §§ 39-26-102(9) and 39-26-102(19), C.R.S. (1982 Repl.Vol. 16B). Therefore, a wholesale purchase is "at retail" for use tax purposes if the goods are not purchased for resale. International Business Machines Corp. v. Charnes, 198 Colo. 374, 601 P.2d 622 (1979). The test for taxability is "whether the item is purchased primarily for resale or whether its resale is merely incidental to the primary purpose of the later transaction." A.B. Hirschfeld Press, Inc. v. City & County of Denver, (Colo.App. 87CA0126, November 17, 1988).
The Broadmoor contends that it is not liable for a use tax because it purchased the snacks for resale to its bar patrons and, therefore, the purchase was not "at retail." The district court agreed based on its determination that, although no separate charge was made, the cost of the snacks is added to the cost of a beverage and thereby resold to bar patrons. It is the Department's position that there was no resale, but rather that the use of the snacks by the Broadmoor was promotional and thereby incidental to its bar service.
In Carpenter v. Carman Distributing Co., 111 Colo. 566, 144 P.2d 770 (1943), it was held that items such as cloth, buttons, thread, and wrapping paper purchased to be used in a laundromat business, with no separate charge to the customer but included in the cost of the service, were not resold to the customer. Similarly, the purchase of pre-press materials to be used by a commercial printer and included in the service price was held to be subject to a use tax. See A.B. Hirschfeld Press, Inc. v. City & County of Denver, supra. In both cases, it was determined that the purchase of the items was for incorporation into the service provided and not primarily for resale.
We find no support in the record for the trial court's determination that the cost of the snacks is included in the price of beverages sold to bar patrons.
To the contrary, the facts support the conclusion of the Department that the use of the snacks by the Broadmoor was to promote its bar service which, particularly in the resort hotel business, is a standard and incidental part of a bar service. Here, the record establishes that there are no restrictions on the amount of complimentary food to be consumed by bar patrons and no charge is assessed if a person fails to purchase a beverage. Also, the Broadmoor charges the same price for each beverage in each of its bars regardless of whether complimentary food is served. Thus, we hold that the purchase of the snacks by the Broadmoor is subject to a use tax.
The Broadmoor, however, contends that even if its purchase of the snacks is subject to a use tax, it is exempt from the tax under § 39-26-203(1)(t), C.R.S. (1982 Repl.Vol. 16B). We disagree.
Section 39-26-203(1)(t) provides an exemption from the use tax for retailers or vendors of food, meals, or beverages for articles of tangible personal property:
"furnished to a consumer or user for use with articles of tangible personal property purchased at retail, if a separate charge is...
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