July 14, 2023
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This will respond to your letter in which you request a ruling on the application of the retail sales and use tax to the sale of tangible personal property by ***** (the "Taxpayer'') at book fair fundraiser events hosted at Virginia schools.
FACTS
The Taxpayer makes retail sales of books and other items at fundraiser events at Virginia schools. The events are staffed by volunteers who are often parents of students, parent teacher organization (PTO) members, or staff of the host school. The Taxpayer does not have employees on site during the events. All transactions are processed through the Taxpayer's point of sale machine. The proceeds from the sales made during the book fair fundraiser are split between the participating school and the Taxpayer. Because it is in the business of making retail sales, the Taxpayer requests a ruling on whether sales tax should be charged on the transactions.
DETERMINATION
Prior to July 1, 2004, Virginia Code § 58.1-609.4 8 provided a statutory exemption for sales made by nonprofit elementary or secondary schools for fundraising purposes. The exemption was provided in part for:
Tangible personal property purchased for use, consumption, or sale at retail by a nonprofit elementary and secondary school, or Parent Teacher Association or other group associated with a nonprofit elementary or secondary school for use in fund-raising activities, the net proceeds (gross proceeds less direct expenses) of which are contributed directly to the school or used to purchase certified school equipment, and certified school equipment purchased by such groups for contribution directly to the school notwithstanding the other provisions of this subdivision, the tax shall not apply to the sale of class rings, school photographs, and other fund-raising programs from which a nonprofit elementary or secondary school receives a commission or the net proceeds after the payment of vendors and other direct expenses.
The exemption statutes provided under Virginia Code § 58.1-609.4 were repealed by the General Assembly in 2003 in order to establish standard criteria under which nonprofit organizations obtained their exempt status under a new administrative process. See Chapters 757 and 758 of the 2003 Acts of Assembly. Virginia Code § 58.1-609.11 was enacted concurrently to create an in-house process allowing the Department to issue sales tax exempt status to qualifying nonprofit organizations in lieu of requesting exemptions from the legislature. As enacted, Virginia Code § 58.1-609.11 A (later renumbered as Virginia Code § 58.1-609.11 B) grandfathered the repealed exemptions of all the nonprofit exemptions, including former Virginia Code § 58.1-609.4 8. However, after July 1, 2007, entities qualifying for the exemption under former Virginia Code § 58.1-609.4 8 were required to renew their exemption with the Department.
It has been the long-standing policy of the Department that nonprofit elementary and secondary schools, and public elementary and secondary schools, qualify as schools operated not for profit. See Public Document (P.D.) 88-93 (5/10/1988), P.D. 95-294 (11/9/1995), and P.D. 10-1 (1/13/2010). The book fair events described by the Taxpayer are considered fund raising programs from which the school receives a commission or the net proceeds after the payment of vendors and other direct expenses.
P.D. 10-1 (1/13/2010) addressed a similar situation in which a third party produced and sold yearbooks to public schools. The schools had an option to contract with the third party seller to collect payments for the yearbooks. The third party seller was not required to collect the retail sales tax since an agency relationship was established between the third party and the public schools. In the case of a nonprofit private school, the same rule applied as long as the school presented a certificate of exemption letter issued by the Department. However, in cases where the nonprofit school was registered to collect retail sales tax and presented a Resale Certificate of Exemption, the third party was required to collect retail sales tax on any yearbook payments collected by the third party.
Accordingly, Virginia's retail sales and use tax does not apply to the sales described by the Taxpayer so long as the commission or net proceeds from such sales are received by a qualifying nonprofit school. Such qualifying schools would include public schools that are exempt from taxation under Virginia Code § 58.1-609.1 4 and nonprofit private schools that provide a Certificate of Exemption.
This ruling is based on the facts presented, as summarized above. Any change in facts or the introduction of new facts may lead to a different result.
The Code of Virginia sections and public documents cited are available online at www.tax.virginia.gov in the Laws, Rules, & Decisions section of the Department's website. If you have any questions regarding this ruling, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at (804) *****, or via email at *****@tax.virginia.gov.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/4359-C