23. I own a liquor store and in addition to sales of alcoholic beverages and other merchandise I rent beer kegs and taps. I charge an amount for the beer contained in the keg and then I charge a deposit to ensure that the equipment is returned. When the equipment is returned, the deposit is refunded in full to the customer. However, sometimes the customer does not return the equipment and I retain the deposit as compensation. How will the 9% tax on the sale of alcoholic beverages apply to my situation?
For sales prior to July 1, 2012, you must charge the 9% sales and use tax on the sale of the beer and on any rental charge that you impose on the lease of the keg and related equipment. The deposit is not subject to sales and use tax. However, if the equipment is not returned and you retain the deposit as payment for the equipment, the deposit will be considered to be part of the taxable price of the alcoholic beverage and is then subject to the 9% sales and use tax.
For sales made on or after July 1, 2012, only the charge for the beer is subject to the 9% rate. Separately stated charges for rental of equipment are taxed at the 6% rate. If the equipment is not returned and you retain the deposit as payment for the equipment, the deposit will be considered to be the charge for the equipment and will be subject to tax at the 6% rate.