Tax Type
Retail Sales and Use Tax
Description
School owned vending machine
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
05-10-1988
May 10, 1988
Re: Ruling Request/ Sales and Use Tax
Dear*****************
This will reply to your letter of July 27, 1987 seeking. a ruling on the correct application of the tax to the operation of certain vending machines by ************* (taxpayer).
FACTS
According to your letter, in connection with its provision of food services to students, the taxpayer, a public school system, owns and operates. certain vending machines. The taxpayer does its own buying and stocking of the machines, and retains all proceeds from the sale of items through the machines. Any profits realized from the operation of the machines are used to defray the entire school system's food service costs. Accordingly, the taxpayer seeks a ruling whether it is liable for the payment of the sales and use tax in making purchases of items for sale through its vending machines.
RULING
§630-10-110 (B)(1) of the Virginia Retail Sales and Use Tax Regulations provides that, "[e]xcept as otherwise authorized by the Tax Commissioner, every person engaged in the business of placing vending machines and selling tangible personal property through such machines must apply for a Certificate of Registration for each county and city in which machines are placed."
However, effective July 1, 1987, retroactive to July 1, 1986, §58.1-608(63) of the Virginia Code provides an exemption from the sales and use tax for, "[t]angible personal property purchased for use, consumption, or sale at retail by an elementary or secondary school conducted not for profit,... 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."
Since any profits realized as a result of the operation of the vending machines in this case are used to defray the food service costs of the entire school system, including the costs of running the system's individual school cafeterias, I conclude that the taxpayer's purchases of items for sale to students through its vending machines, qualify for the above referenced exemption. Therefore, the taxpayer is not subject to the registration and reporting requirements of §630-10-110 of the regulations in the operation of the machines.
I hope that this has responded to your question, but let me know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner