Tax Type
Retail Sales and Use Tax
Description
Entitlements, exemptions, and real property taxes
Topic
Exemptions
Local Power to Tax
Date Issued
06-11-2002
June 11, 2002
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in response to your letter of March 4, 2002, and subsequent correspondence requesting a ruling on the application of the retail sales and use tax to transactions involving the ***** (the "CDA"). The CDA was created under authority of ***** (the "Locality").
FACTS
A community development authority is created pursuant to Article 6 of the Virginia Water and Waste Authorities Act (i.e., Code of Virginia § 15.2-5152 et seq.) The purpose of the CDA at issue is to develop an inn and conference center with an adjacent eighteen-hole golf course on a 400-acre tract. The CDA plans to issue facility revenue bonds to pay for the construction of the facilities and to be solely responsible for repaying the bonds. Once built, the CDA will contract with private third-party managers to run the facilities. At the expiration of the CDA's term, the ownership of the property with improvements will revert to the Locality.
RULING
Sales and use tax exemptions: In Short Pump Town Center Community Development Authority, et al. v. Arlie A. Hahn, Jr., et al., 262 Va. 273, (2001), the Virginia Supreme Court decided that a community development authority is not a political subdivision of the Commonwealth. The court also concluded that a CDA is not a locality, an agency or instrumentality of the Commonwealth. Although Short Pump does not involve a tax case, there appears to be nothing in the Virginia Retail Sales and Use Tax Act that would treat a CDA as a political subdivision.
Code of Virginia § 58.1-609.1(4) provides an exemption from the retail sales and use tax for "[t]angible personal property for use or consumption by the Commonwealth, any political subdivision of the Commonwealth, or the United States." Because the CDA is not a political subdivision of the Commonwealth, and under the doctrine of strict construction of sales and use tax exemptions, the CDA does not qualify for the government exemption.
Accordingly, the CDA is liable for the retail sales and use tax on any of its purchases of tangible personal property, including furnishings and equipment, for use in the inn, conference center, or golf course. However, when the ownership of the facilities reverts to the Locality, the Locality's purchases of tangible personal property for use at the facilities will qualify for the government exemption.
The government exemption cited above also does not apply to any contractors engaged to furnish and erect buildings and fixtures for the CDA. Rather, a real property construction contractor would remain liable for the sales and use tax on all tangible personal property that it incorporates into realty owned by the CDA. See Title 23 of the Virginia Administrative Code 10-210-410(A).
Sales tax entitlements: The CDA will not qualify for any of the sales tax revenue entitlements granted under Code of Virginia § 58.1-608.3. Those entitlements are available only to certain localities (specified by population brackets). The Locality in this case is not one of the localities specified in the statute.
Real property taxes: Exemptions from real estate taxes are governed by Chapter 36 of Title 58.1 of the Code of Virginia. The authority for administering real estates taxes rests solely with the localities. Accordingly, you should contact the locality in which the CDA is located for questions about real estate taxation.
Copies of the Code of Virginia sections cited, regulations and public documents are available online in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us. If you have any questions about this ruling, you may contact ***** in the department's Office of Policy and Administration, Appeals and Rulings, at *****.
Sincerely,
Kenneth W. Thorson
Tax Commissioner
AR/39263R
Rulings of the Tax Commissioner