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Author Topic: Example: highest rated store code >25% not assigned  (Read 3073 times)
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« on: February 17, 2009, 11:08:06 AM »

I audited a dairy that processed, bottled, and sold all their milk through their own retail store which has a single entrance/exit, is less than 5,000 square feet, and open until 8pm 7 days a week.

In addition to milk (50% of total gross receipts), they also sold a variety of purchased feed products such as hay, scratch, mash, seed, dog food, cat food, rabbit pellets, etc. (50% of total gross receipts); and a variety of purchased and prepackaged food products such as cheese, bread, lunch meat, ice cream, beer, wine, soda, cigarettes, snack foods, etc. (5% of total gross receipts).

The two codes that might apply to this store are:

  • 8006(1) Stores — groceries and provisions — retail (pure premium rate = $3.90)
  • 8117 Stores — feed, tack and farm supplies (pure premium rate = $4.53)

Per the Special Rule for stores, the highest rated category of merchandise sold that exceeds 25% of gross receipts shall be assigned to stores that sell more than one type of merchandise. So it appears as if code 8117 applies because it’s the higher rated of the two codes, and the type of merchandise sold that is contemplated by code 8117 exceeds 25% of the total gross receipts of the store. 

However, the Special Rule for stores (Part 3, Section IV, Paragraph 5b) states “…In the absence of specific instructions found in the classification phraseology or footnote, the following definitions apply when determining the applicable store classification.”

The footnote to code 8006(1) states, in part, “This classification shall apply to stores principally (over 50% of gross receipts) engaged in the sale of grocery items such as, but not limited to, fresh and frozen produce, dairy products, cereals, canned goods, frozen foods, bread, condiments, baking supplies, flour, soft drinks, coffee, tea, delicatessen style meats, salads, and cheeses.” 

The footnote for code 8006(1) supersedes the Special Rule requiring that the highest rated category of merchandise exceeding 25% of gross receipts shall apply.  Therefore, since over 50% of the merchandise sold in this example is contemplated by code 8006(1), the fact that feed accounts for well over 25% of gross receipts is moot.
« Last Edit: February 18, 2009, 11:13:26 AM by AuditorBob, Reason: added sq ft & hours » Logged

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