Tax Type
Retail Sales and Use Tax
Description
The purchases do not qualify for an exemption as provided in the Virginia Constitution
Topic
Exemptions
Tangible Personal Property
Date Issued
10-17-2008
October 17, 2008
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the "Church") requesting a ruling on the application of the retail sales and use tax to the purchase of structural steel and an HVAC system to be incorporated into the construction of the Church's religious congregational meeting facility. I apologize for the delay in responding to your correspondence.
FACTS
The Church is incorporated in Virginia and exempt from federal taxation under IRC § 501(c)(3). In 2007, the Church began construction of a new religious congregational meeting facility (the "facility") that will be used for religious worship services by the congregation. The Church entered into an agreement with its general contractor whereby the Church (i) acquires the materials, and (ii) provides, without transfer of ownership, the materials to the general contractor, at no cost, for incorporation in the construction of the facility.
Relying on provisions of the Constitution of Virginia and Va. Code § 58.1-609.10 16, the Church contends that the retail sales and use tax does not apply to the purchases of structural steel and an HVAC system for incorporation in the aforementioned construction.
RULING
Virginia Code § 58.1-609.10 16 provides that the retail sales and use tax shall not apply to:
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- Tangible personal property purchased by nonprofit churches that are exempt from taxation under § 501(c)(3) of the Internal Revenue Code ... for use (i) in religious worship services by a congregation or church membership while meeting together in a single location and (ii) in the libraries, offices, meeting or counseling rooms or other rooms in the public church buildings used in carrying out the work of the church and its related ministries, including kindergarten, elementary and secondary schools. The exemption for such churches also includes ...building materials installed by the church, and for which the church does not contract with a person or entity to have installed . . . ." [Emphasis added.]
The amendment to the statute by the 2007 General Assembly provided the exemption for the purchase of building materials that are installed by a church. The exemption does not extend to building materials that are installed pursuant to a contract between a church and a contractor.
In this instance, the Taxpayer entered into an agreement with a contractor for the purpose of having its meeting facility constructed. The agreement clearly provides that the Taxpayer acquires the building materials and then provides them to the contractor for installation. Pursuant to Virginia Code § 58.1-609.10 16, the HVAC system and structural steel at issue are subject to the Virginia retail sales and use tax because these materials will be used by the contractor in the construction of the meeting facility. The exemption is governed by the statute and is limited to the terms of the statute. Accordingly, the exemption only applies in instance, when a church purchases the materials and installs them without a contractor.
Additionally, the portions of the Virginia Constitution cited by the Taxpayer do not extend a retail sales and use tax Exemption to the purchase of the structural steel and HVAC system at issue in this ruling request. The Virginia Constitution very clearly identifies the situations in which an exemption from tax would be applicable. The purchases at issue are not of the type that would qualify for an exemption as provided in the Virginia Constitution.
The Code of Virginia section and public document cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this response, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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AP/1-1967927844.P
Rulings of the Tax Commissioner