89-266 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Nonprofit organization promoting American traditions

Topic

Taxability of Persons and Transactions

Date Issued

10-17-1989

October 17, 1989

Re: Request for Ruling/ Sales and Use Tax

Dear***************

This will reply to your letters of January 13, 1989, and March 24, 1989, requesting exemption from the retail sales and use tax for the ***********. We regret the delay in providing you with a response to your inquiry.

Facts

***********("the Association") is an organization exempt from income taxation under §501(c)(3) of the Internal Revenue Code and formed as an educational organization devoted to promoting American traditions, especially those of free enterprise and competition. The Association strives to motivate and educate youth to the economic and personal opportunities available under America's free enterprise system.

The Association offers various programs for schools and colleges throughout the United States including youth seminars, scholarships for high school students, internship program for outstanding youth, a speaker's bureau, book loan services for libraries, and a free-enterprise seminar for educators. In the youth seminars, members of the Association will speak with high school students in both large and small group sessions in a day-long program hosted by the high school and focusing on America's free enterprise system. The Association also conducts a week-long forum, hosted at a major U.S. university, on free enterprise and entrepreneurship for selected high school students, who will then serve as interns in offices of mentors selected from their local business communities.

The Association is requesting exemption from the retail sales and use tax under Virginia Code §58.1-608(4)(d).

Ruling

There is no general exemption from the Virginia retail sales and use tax for nonprofit organizations (See §630-10-74 of the Virginia Retail Sales and Use Tax Regulations). The only exemptions from the tax are set out in Virginia Code §58.1-608.

§58.1-608(4)(d) of the Code of Virginia provides an exemption from retail sales and use tax for:

- Tangible personal property and services purchased by an educational institution doing business in the Commonwealth which (i) admits regularly enrolled high school and college students, and (ii) provides a face-to-face educational experience in American government, a program which leads towards the successful completion of United States history, civics, and problems in democracy courses in high school, or which is acceptable for full credit towards an undergraduate or graduate level college degree, provided such institution is conducted not for profit.

The above statute was enacted by the 1981 session of the General Assembly and was revised in 1983 to also provide an exemption for taxable services. The statute is intended to apply only to an organization which focuses on providing certain experiences in American government. Participants in the programs of such an organization would usually attend over a period of several days a series of lectures, seminars and workshops that include presentations by officials in local and national government on the processes and issues of government. The participants would learn about government and then experience how it worked, e.g. by attending sessions of Congress or committee hearings and meetings.

Applying the facts of this case to the code section cited above, and applying the rule of narrow construction for exemptions from taxation (Retail Sales and Use Tax Regulation §630-10-35.2), I find that the Association does not meet the criteria necessary to qualify for exemption under Virginia Code §58.1-608(4)(d). While the Association's programs promote free enterprise and entrepreneurship, they do not provide the face-to-face educational experience in American government contemplated by the statute.

While I am mindful of the worthwhile purpose that the Association serves, absent a statutory exemption that would allow the Association to make purchases exempt from the tax, the department has no authority to grant such an exemption. Therefore, the Association is required to pay the retailer on all purchases of tangible personal property if the retailer is registered to collect the tax. If the retailer is not registered to collect the tax, the Association must report and pay the tax on a Consumer Use Tax Return, Form ST-7.

Please contact the department if you have additional questions or if we may be of any further assistance.

Sincerely,

W. H. Forst
Tax Commissioner

Rulings of the Tax Commissioner