Tax Type
Retail Sales and Use Tax
Description
Governmental public service corporation; Public transportation
Topic
Taxability of Persons and Transactions
Date Issued
03-23-1989
March 23, 1989
Re: Request for Ruling: Sales and Use Tax
Dear****************
This will reply to your previous correspondence requesting a reevaluation of my November 29, 1983 ruling.
FACTS
********("Taxpayer") is a public service corporation founded by the governments of three Virginia localities for the purpose of operating a public transportation system. The taxpayer wishes to determine whether it is entitled to exemption from the sales and use tax and other state taxes as a political subdivision of the state.
RULING
Va. Code §58.1-608(18) provides an exemption from the sales and use tax for "[t]angible personal property for use or consumption by the Commonwealth, [or] any political subdivision of the Commonwealth."
The taxpayer is organized as a public service corporation separate and distinct from the local governments that created it. The department has consistently held that a nonprofit corporation, even when controlled by the Commonwealth or one or more of its political subdivisions, is a separate legal entity and is not entitled to the sales and use tax exemption in Va. Code §58.1-608(18). This issue is currently in litigation in Virginia International Terminals, Inc. v. Commonwealth in the Circuit Court for the City of Portsmouth.
I feel it is also helpful to note the August 26, 1976 opinion of the Attorney General relating to a public service corporation that is similar to the taxpayer in its manner of organization and operation. This opinion, a copy of which is enclosed, held that a transit company organized by a city was in fact independent of the city and that the revenues of the company were not "public money of the city. "
Based upon the information contained in the taxpayer's preincorporation subscription agreement and its articles of incorporation. I do not see any basis to distinguish the taxpayer from other similar corporations that have been formed by local or state governmental bodies. As such, I cannot find basis for exemption under Va. Code §58.1-608(18). However, the taxpayer will continue to enjoy the exemption for common carriers by motor vehicle provided under Va. Code §58.1-608(10).
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner