Tax Type
Retail Sales and Use Tax
Description
Casket and vault purchases by a nonprofit nursing home
Topic
Taxability of Persons and Transactions
Date Issued
10-27-1989
October 27, 1989
Re: Ruling Request/ Sales and Use Tax
Dear**************
This will reply to your letter of July 28, 1989 seeking reconsideration of my July 27, 1989 ruling to a funeral home concerning the application of the sales tax to caskets, vaults, etc., purchased by (taxpayer) for use in the funeral services of its deceased residents.
FACTS
The taxpayer is a private, non-profit home for physically disabled Virginians. A large percentage of the taxpayer's residents are financially indigent and unable to afford to pay for their own funerals. As part of its overall service to these residents, the taxpayer often pays the cost for the caskets and vaults needed for their funerals and burials.
The taxpayer seeks reconsideration of a July 27, 1989 ruling of the department to a funeral home from whom the taxpayer purchases caskets and vaults, which indicated that such purchases by the taxpayer did not qualify for sales tax exemption. The taxpayer states that it might not be able to afford to provide this service to its residents in the future if it is required to pay sales tax on the purchases.
RULING
There is no general exemption in the sales and use tax for all purchases made by a nonprofit organization. The only exemptions available to nonprofit and other organizations are those specifically set forth in Virginia Code §58.1-608.
Virginia Code §58.1-608(8)(j) provides an exemption from the sales and use tax for, "[t]angible personal property for use or consumption by a licensed nonprofit home for adults as defined in subsection A of §63.1-172." (Emphasis added)
Unlike its purchases of caskets and vaults, the taxpayer in this case may purchase exempt of the tax, food which it prepares for consumption by its residents since it makes a use of the food (i.e., preparation), before it is actually served to residents. The taxpayer may also purchase exempt of the tax, furniture and similar items such as beds, wheelchairs, etc., since these items typically remain the property of the taxpayer and usable by other residents, long after the period of residence of the particular resident for whom they were initially purchased.
In interpreting the scope of sales and use tax exemptions, the Virginia Supreme Court has adopted the rule of strict construction. Under this rule, "[t]axation is the rule and not the exception, and statutory exemptions are construed strictly against the taxpayer. When a tax statute is susceptible to alternative constructions, one granting an exemption and the other denying it, the latter construction will be adopted. Winchester TV Cable Co. v. State Tax Commissioner, 216 Va. 286, 217 S.E. 2d 885 (1977).
While I am mindful of the benevolent work which the taxpayer performs for the severely disabled, under the rule of strict construction of exemptions adopted by the Supreme Court, I continue to find no basis in the sales tax law for exempting the taxpayer's purchases of caskets and vaults for its deceased residents.
Please let me know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner