Tax Type
Retail Sales and Use Tax
Description
Continuing executive education courses and training are deemed professional services
Topic
Exemptions
Nonprofits
Date Issued
03-03-2010
March 3, 2010
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of your client (the "Taxpayer"), in which you request a ruling on the application of the retail sales and use tax to charges for its open enrollment and custom courses. You also ask whether the local meals tax would apply to meals served by the Taxpayer. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is a § 501(c)(3) organization that provides 3 to 30 day continuing executive education courses and training for unrelated parties. The Taxpayer utilizes a building in which it provides the educational training. The multi-function building is comprised of meeting rooms, dining facilities, private bedrooms, and fitness and recreation rooms. Typically, course participants reside in the building over the time period during which the course is held.
The Taxpayer provides open enrollment and custom courses for its students. The open enrollment courses are open to the public. The fee for the open enrollment courses is a single fee that includes tuition for the course, materials, room and board. The charges for each are not separately stated on the invoice given to the student. The custom courses are developed by the Taxpayer to meet the specific needs of a corporation to educate its employees. The corporation is invoiced for the cost of the course, materials and room and board for the attendees. The materials and room and board are sometimes itemized on the invoice.
RULING
Open Enrollment and Custom Courses
Virginia Code § 58.1-609.5 1 provides, in pertinent part, the retail sales and use tax does not apply to "[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made . . . ."
Title 23 of the Virginia Administrative Code (VAC) 10-210-4040 A states, "Charges for services generally are exempt from the retail sales and use tax . . . . Transactions involving both the sale of tangible personal property and the provision of services, generally are either taxable or exempt on the full amount charged, regardless of whether the charges for the service and property components are separately stated."
-
- Title 23 VAC 10-210-4040 D provides:
-
- In order to determine whether a particular transaction which involves both the rendering of a service and the provision of tangible personal property constitutes an exempt service or a taxable retail sale, the "true object" of the transaction must be examined. If the object of the transaction is to secure a service and the tangible personal property which is transferred to the customer is not critical to the transaction, then the transaction may constitute an exempt service. However, if the object of the transaction is to secure the property which it produces, then the entire charge, including the charge for any services provided, is taxable.
In Public Document 93-230 (12/15/93), the taxpayer operated as a franchise that provided computer training services to corporations, government agencies and individuals. The taxpayer charged a lump sum fee for tuition and all course materials. The taxpayer purchased its supplies exempt from the sales and use tax from its franchisor located outside Virginia. Use tax was assessed in the audit on training materials used by the taxpayer. The true object test was applied, and it was determined that the true object: of the transactions at issue was the provision of training services by the taxpayer. As such, the entire charge for such services, including charges for materials provided by the taxpayer to course participants, qualified for exemption from the tax.
In this instance, the continuing executive education courses and training are deemed professional services in accordance with Va. Code § 58.1-609.5 1. Accordingly, the true object of the transactions at issue is the provision of the education services by the Taxpayer. Therefore, the entire charge for such services, including charges for lodging, meals and materials, qualifies for exemption from the tax. Pursuant to Title 23 VAC 10210-4040 A, the entire charge for such services would be exempt from the tax, regardless of whether the charges are separately stated.
Local Meals Tax
Virginia Code § 58.1-3833 authorizes any county in the Commonwealth to "levy a tax on food and beverages sold, for human consumption, by a restaurant ...." The statute provides very specific instances in which the local tax would not be applied. Additionally, the statute does not explicitly state that it adopts the provisions of the retails sales and use tax.
In Public Document 93-204 (9/29/93), the taxpayer was a nonprofit church that operated a swimming pool on its property and sold concessions to the at the pool site to its parishioners. The taxpayer requested a ruling regarding whether its exempt status with respect to the retail sales and use tax applied to the local meals tax. The ruling stated that while many localities that are authorized to impose the local meals tax piggyback on the retail sales and use tax to ease the administration of the local tax, doing so is strictly voluntary. The taxpayer was instructed to contact the commissioner of the revenue in its locality for guidance on the imposition of the local meals tax in the scenario presented.
Based on the information provided, the Taxpayer is not liable for the retail sales and use tax on the charges associated with the courses that it provides. The Taxpayer maintains that the county exempts the sale of food from the meals tax when the sale is also "exempt" from the Virginia sales tax. The local meals tax at issue in this instance is administered by the county in which the Taxpayer is located, not by the Commonwealth of Virginia. As such, it would be for the county to decide whether the local meals tax would apply. Accordingly, the Taxpayer should contact its local commissioner of the revenue to determine the correct application of the local meals tax to the scenarios presented.
This response is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.
The Code of Virginia sections, regulation and public document cited are available online 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 *****.
-
-
-
-
-
-
-
- Sincerely,
-
-
-
-
-
-
-
-
-
-
-
-
-
Janie E. Bowen
Tax Commissioner
-
-
-
-
-
-
AR/1-2622933695.P
Rulings of the Tax Commissioner