Tax Type
Retail Sales and Use Tax
Description
Group home for the mentally handicapped
Topic
Taxability of Persons and Transactions
Date Issued
10-02-1987
October 2, 1987
Re: §58.1-1821 Application/ Sales and Use Tax
Dear ****************
This will reply to your letter of March 30, 1987 seeking correction of an assessment in the above referenced case for the audit period January, 1984 through December, 1986, on behalf of the ***************** (taxpayer).
FACTS
The taxpayer is a Virginia nonstock corporation organized for the purpose of providing personnel, services, and facilities for the evaluation, education and training of mentally and physically handicapped persons and attempting to enable them to perform useful and remunerative work, including providing sheltered employment. In this connection the taxpayer operates a program known as ********** for the purpose of providing a group home for the mentally handicapped which is licensed and funded by the Department of Mental Health and Mental Retardation. It is our understanding that the group home's management and budget are purposely maintained separate and apart from the taxpayer's own management and budget.
The taxpayer contests that portion of the assessment on the group home's untaxed purchases of certain items such as food and training supplies, contending that such purchases qualify for exemption from the tax under Virginia Code §58.1-608(24).
DETERMINATION
Section 58.1-608(24) of the Virginia Code provides an exemption from the sales and use tax for, "[t]angible personal property purchased by an organization exempt from taxation under §501(c)(3) of the Internal Revenue Code and organized exclusively for the purpose of providing education, training and services to retarded citizens of the Commonwealth, provided such property is used exclusively for the purpose set forth herein and further provided that such organization receives more than fifty percent of its total funding from federal, state, or local governments." (Emphasis added)
Therefore, for an organization to qualify for this exemption it must be:
-
- 1. exempt from taxation under §501(c)(3) of the Internal Revenue Code;
2. organized exclusively for the purpose of providing education, training and services to retarded citizens of the Commonwealth, and;
3. receive more than fifty percent of its total funding from federal, state, or local governments.
- 1. exempt from taxation under §501(c)(3) of the Internal Revenue Code;
Furthermore, since the group home has no legal existence apart from that of the taxpayer, it may not claim an exemption from the tax for which the taxpayer does not also qualify.
Accordingly, since the taxpayer is organized for many worthy purposes other than the provision of education, training and services to retarded citizens of the Commonwealth, and since its group home cannot qualify for an exemption from the tax for which the taxpayer does not also qualify, I find no basis for the exemption claimed in this case.
A representative of the department's Tax Policy Division will contact you shortly in order to finalize this matter.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner