Retail Sales and Use Tax Exemptions for Nonprofit Organizations
- Filing Requirements for Nonprofit Organizations
- Retail Sales and Use Exemption Criteria
- Requirements for Nonprofit Churches
- Apply Online for a Retail Sales and Use Tax Exemption
- Nonprofit Exemption FAQs
- Search for a Nonprofit Organization
Legislation passed by the 2003 Virginia General Assembly allow nonprofit organizations exempt from federal income taxation under Sections 501(c) (3) or 501(c)(4) of the Internal Revenue Code to qualify for a sales and use tax exemption. Nonprofit organizations are no longer required to seek legislative action for their exemption through the Virginia General Assembly. The Department of Taxation currently administers this process.
A Nonprofit organization seeking a new exemption must meet certain eligibility criteria. Nonprofit organizations that held a valid exemption as of June 30, 2003, will remain exempt until their exemption expires, at which time, they will be required to re-apply under the new process. Reference: Virginia Code, 58.1-609.11
To qualify for an exemption, a nonprofit organization must meet all of the following criteria:
The organization must be exempt from federal income taxation under Sections 501(c)(3) or 501(c)(4). If exempt under Section 501(c)(4), the organization must be organized for a charitable purpose. If the organization has annual gross receipts less than $5,000, it must be organized for at least one of the purposes set forth in Section 501(c)(3), or one of the charitable purposes set forth in Section 501(c)(4). For more information, visit the IRS website at www.irs.gov/eo or you may contact them at (877) 829-5500.
The organization must provide proof of compliance with Chapter 5 of Title 57 (relating to solicitation of contributions) of the Code of Virginia for organizations subject to it. For more information, contact the Department of Agriculture and Consumer Services at (804) 786-1343 or visit their web page.
The annual administrative costs of the organization, including salaries and fundraising, must not exceed 40 percent of its annual gross revenue as determined under generally accepted accounting principles.
An organization with gross annual revenue of at least $750,000 in the previous year must provide a financial review performed by an independent certified public accountant. The Department may require an organization with gross annual revenue of at least $1million in the previous year to provide a financial audit performed by an independent certified public accountant in lieu of a financial review.
The organization must provide an estimate of the total amount of tangible personal property purchased in Virginia for the preceding year, the current year, and an estimate of expected purchases for the next year. Do not include purchases of any tangible personal property that will be furnished to a contractor performing construction, installation, repair or any other service with respect to real property.
If the organization is required to file a federal Form 990, 990EZ, 990PF, or 990N with the IRS, then you must provide a copy of such form to the Department of Taxation.
If the organization is not required to file a federal Form 990, 990EZ, 990PF, or 990N, you must provide the following information:
- Names and addresses of two members of the organization's Board of Directors
- Location where the financial records of the organization are available for public inspection
Please contact the Department of Taxation at (804) 371-4023 if you have questions regarding this process.
Legislation passed in the 2004 Virginia General Assembly (House Bill 515 and Senate Bill 585) provides two options for nonprofit churches to request a retail sales and use tax exemption. Nonprofit churches may either continue to use the self-issued exemption certificate, Form ST-13A, or apply to the department for a tax-exempt number.
Option 1: Form ST-13A
Code of Virginia Section 58.1-609.10(16) allows nonprofit churches to use the self issued exemption certificate Form ST-13A. Churches electing this option are entitled to the sales and use tax exemption available under the law, as it existed on June 30, 2003. Title 23 of the Virginia Administrative Code (VAC) 10-210-310 provides an exemplary listing of taxable and exempt purchases for nonprofit churches. Over the years, the exemption has been expanded to include, church bulletins, programs, newspapers, and newsletters distributed outside the church, gifts distributed outside the church, baptisteries, food, disposable serving items, cleaning supplies, teaching materials used in the operation of a camp or conference center which are used in carrying out the work of the church. The 2006 General Assembly further expanded this exemption to include tangible personal property used for recording and reproducing services. This would include video recording equipment, microphones, and cassette players. Beginning July 1, 2007, churches may purchase tangible personal property used in caring for or maintaining property owned by the church including, but not limited to, mowing equipment and building materials. The church may not contract with a person or entity to have building materials installed, in the public church buildings used in carrying out the work of the church and its related ministries. This would also include, but not limited to worship services, administrative rooms, kindergarten, elementary, and secondary schools.
Option 2: Tax-Exempt Number
Code of Virginia Section 58.1-609.11 provides a broader exemption to nonprofit organizations and churches seeking a sales and use tax exemption. All exemption criteria under Code of Virginia 58.1-609.11 must be met to qualify.
Nonprofit Online is a quick, efficient and secure way for you to apply for and print your sales and use tax certificate online. You can access Nonprofit Online to edit certain registration information as it changes, renew your expired or expiring exemption, as well as reprint lost certificates without having to contact the Department. You may also send secure e-mail messages to TAX through a secure environment.
Nonprofit Online is available to anyone requesting a sales and use tax exemption for a nonprofit organization or a nonprofit church. You will be required to create a user-id and password in order to register your organization. To qualify for an exemption, you must meet all of the exemption criteria under Code Section 58.1-609.11.
Organizations that are unable to apply online can download the Nonprofit Application and Instructions or contact the Nonprofit Exemption Team at (804) 371-4023 to request an application. Completed applications should be sent to the Department of Taxation, Nonprofit Exemption Team, Post Office Box 27125, Richmond, Virginia 23261-7125.
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Last Updated 2/28/2013 15:14