Tax Type
Retail Sales and Use Tax
Description
Parent Teacher Association; Donations
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
04-10-1989
April 10, 1989
Re: Ruling Request/Sales and Use Tax
Dear****************
This will reply to your letter of January 12, 1989, on behalf of ************** (taxpayer), an association representing parent-teacher associations, (PTA's) statewide, seeking information on the correct application of the sales and use tax to purchases and sales made by PTA's.
FACTS
You ask whether PTA's must remit the tax when resident or nonresident vendors fail to charge sales tax when supplying products for use by the PTA's in school fund-raising events; whether the tax must be paid on goods donated for sale at carnivals, bake sales, auctions, flea markets, and similar fund-raising events sponsored by PTA's; and, whether sales tax must be paid when revenues from a fund-raising event exceed the amount needed by PTA's to purchase certified school equipment. You ask further whether a special form must be used by PTA's to remit the tax in any of the above situations, and the consequences of failure to pay the tax in any of such instances.
RULING
Under Virginia Code §58.1-608(63), copy enclosed, a PTA must meet three tests in order to qualify for exemption from the sales tax. First, it must be affiliated with a nonprofit elementary or secondary school. Second, the property purchased by the PTA must be used in fund-raising activities on behalf of the school. Lastly, the net proceeds after the payment of direct expenses must be contributed directly to the school or used to purchase certified school equipment.
Provided these three tests are met by the PTA, it need not pay the tax on purchases of tangible personal property from either resident or nonresident vendors. However, when making such purchases, PTA's must provide their vendors with a Form ST-13, copy enclosed, indicating the tax exempt nature of the purchases.
In addition, Virginia Code §58.1-608(59) provides an exemption from the sales and use tax for, "[t]angible personal property withdrawn from inventory and donated to (i) an organization exempt from taxation under §501(c)(3) of the Internal Revenue Code, or (ii) the Commonwealth, any political subdivision of the Commonwealth, or any school, agency or instrumentality thereof." (Emphasis added)
Therefore, PTA's need not pay sales or use tax on inventory items donated by dealers for use in fundraising activities, such as bake sales, carnivals, etc. In addition, no sales tax will be due on donations to PTA's of tangible personal property or components of such property, provided the donor of the property previously paid sales or use tax on the donated items. Donations to PTA's of tangible personal property on which no sales tax was previously paid by the donor, would be subject to use tax, payable by the donor, based on the cost price of such donated items. Such use tax would be payable by the donor directly to the department on Form ST-7, copy enclosed.
Further, PTA's need not charge sales tax on donated items which they sell at such fundraising events, provided the net proceeds of such sales are donated to a nonprofit elementary or secondary school, or used to purchase certified school equipment.
The above exemption would not apply however, if a PTA deposits any excess receipts or proceeds from its fund-raising activities into its own account for use in funding its own activities, such as to purchase office supplies or for payment of summer conference or convention expenses. In such cases, the use of the net receipts would not meet the specific statutory requirements, i.e., that the net receipts be contributed to the school or used to purchase certified school equipment.
If a PTA's resident or nonresident vendor fails to properly charge the tax on a transaction which fails to qualify for tax exemption, the PTA must remit the use tax on such items purchased, using consumer use tax reporting Form ST-7, copy enclosed. Failure to remit the use tax on such purchases, could result in the assessment of tax, penalties and interest against a PTA in a future audit.
In addition to the foregoing, I have enclosed a copy of Tax Bulletin 86-8 as requested, and a few recent rulings issued by the department concerning this exemption. Please let the department know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner