Tax Type
Retail Sales and Use Tax
Description
Elementary or secondary school class rings
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
05-12-1988
May 12, 1988
Re: Ruling Request/ Sales and Use Tax
Dear****************
This will reply to your letter of September 4, 1987 on behalf of ********** (taxpayer) seeking a ruling on the application of the sales and use tax to sales of class rings and other items from which elementary or secondary schools conducted not for profit receive a commission. This also has reference to documentation remitted to a member of my staff on September 8, 1987 in support of this ruling request. We apologize for the delay in providing you with this response.
FACTS
Specifically, you ask whether the recently expanded sales and use tax exemption in Virginia Code §58.1-608(63) applies to sales of:
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- class rings ordered directly by students in the spring of 1987, but not invoiced or delivered to the students until the fall of 1987, if either 4.5% of the total sales price, or a flat dollar amount for each ring sold, is paid to the school as a commission, or
caps and gowns, graduation announcements, yearbooks, etc., directly to schools themselves on behalf of their students where $1.00 is added to the unit price of each item and later remitted back to the schools.
- class rings ordered directly by students in the spring of 1987, but not invoiced or delivered to the students until the fall of 1987, if either 4.5% of the total sales price, or a flat dollar amount for each ring sold, is paid to the school as a commission, or
RULING
Effective July 1, 1987, but retroactive to July 1, 1986, 58.1-608(63) of the Virginia Code provides an exemption from the sales and use tax for:
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- Tangible personal property purchased for use, consumption, or sale at retail by an elementary or secondary school conducted not for profit, or Parent Teacher Association or other group associated with ... [such school] ... for use in fund-raising activities, the net proceeds (gross receipts 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 an elementary or secondary school conducted not for profit receives a commission or the net proceeds after the payment of vendors and other direct expenses.
- Tangible personal property purchased for use, consumption, or sale at retail by an elementary or secondary school conducted not for profit, or Parent Teacher Association or other group associated with ... [such school] ... for use in fund-raising activities, the net proceeds (gross receipts 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 an elementary or secondary school conducted not for profit receives a commission or the net proceeds after the payment of vendors and other direct expenses.
However, for ring orders placed with the taxpayer prior to the effective date of this exemption and invoiced to students after the exemptions effective date which indicate a separate charge for sales tax, the taxpayer may not reinvoice the students to reflect payment of a commission to the school rather than sales tax to the state. Therefore, if the taxpayer included a 4.5% charge for sales tax on its invoices to students it may not now reinvoice the students to replace the 4.5% tax with a 4.5% commission. This is also true for ring orders placed with the taxpayer and billed to students entirely after the exemptions effective date for which a separate charge was made for sales tax.
The foregoing is in accord with Virginia Code §58.1-625 which provides in pertinent part that, "[a]ny dealer collecting the sales or use tax on transactions exempt or not taxable under this chapter shall transmit to the Tax Commissioner such erroneously or illegally collected tax unless or until he can affirmatively show that the tax has since been refunded to the purchaser or credited to his account."
In addition, the tax does not apply to sales of caps, gowns, graduation announcements, yearbooks, etc., directly to nonprofit elementary or secondary schools, provided the taxpayer receives a properly completed certificate of exemption (Form ST-13), copies enclosed, at the time of making such sales. This certificate of exemption would also be required to substantiate any tax exempt sales of such items to organizations affiliated with the schools, such as Parent Teacher Associations. It should be noted further that the taxpayer need not pay a commission to the school when making sales of such items directly to the school or directly to school affiliated organizations, provided it receives a Form ST-13 at the time of making such sales.
To the extent that the taxpayer may have erroneously charged sales tax to a nonprofit elementary or secondary school in making sales of any of the above referenced items between July 1, 1986 and July 1, 1987, the schools themselves may seek refunds of such tax paid directly from the department's Taxpayer Assistance Section at P.O. Box 6-L, Richmond, Virginia 23282.
I hope that the foregoing has responded to your questions, but let the department know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner