Tax Type
Retail Sales and Use Tax
Description
Fund raising equipment leased to churches, charities, and nonprofit groups
Topic
Taxability of Persons and Transactions
Date Issued
11-20-1989
November 20, 1989
Re: Request for Ruling/Sales and Use Tax
Dear*********************
This will reply to your recent letter in which you request a ruling on the application of the sales and use tax to your business.
FACTS
*********** (the "Taxpayer") was organized primarily to lease certain equipment used in connection with put on by various churches, charities and similar community service groups to raise money. In some instances, it provides only the necessary equipment while in others it provides both the equipment and services to operate the equipment. The Taxpayer requests a ruling on the applicability of the sales and use tax to its business.
RULING
I will address the questions posed in the Taxpayer's letter individually:
State sales tax liability: Virginia Retail Sales and Use Tax Regulation 630-10-57 states that the tax generally applies to leases of tangible personal property without operators. Conversely, a lease with an operator would be considered a nontaxable service under Virginia Code §58.1-608(5)(a).
Thus, for those instances in which the Taxpayer provides only equipment to the lessee it should register as a dealer and collect and pay the tax on its gross proceeds. To register as a dealer the Taxpayer must file an application for a Certificate of Registration (copy enclosed) with the department. See VR 630-10-21. Additionally, the tax collected must be remitted to the state as provided in VR 630-10-24.
For those instances in which the Taxpayer provides an operator with the equipment, no tax will be due regardless of the type of organization leasing the equipment.
Leases of equipment to charities, churches, etc.: I have enclosed a copy of a ruling letter which sets forth the application of the sales and use tax to the sale of fund-raising materials to schools, churches, and civic organizations. This will also apply to leases of fund-raising equipment without operators. Under the enclosed ruling, only equipment leased to a Parent Teacher Association or other group affiliated with elementary or secondary schools, or to the schools themselves qualified for exemption from the sales tax. Leases of fund-raising materials to other groups such as churches, charities and similar community services groups remained subject to the sales tax. The ruling also explains the kind of information the Taxpayer will need to obtain from its customers in order to substantiate any tax exempt transactions.
Leases to out-of-state customers: VR 630-10-51 provides that the tax does not apply to sales of tangible personal property in interstate or foreign commerce. Under this provision, the Taxpayer's lease of equipment to all customers located outside Virginia would be exempt from the tax.
Enclosed is a copy of the Virginia Retail Sales and Use Tax Regulations which contains all of the regulations referenced above. A copy of the General Provision Regulations applicable to all taxes administered by the department is also enclosed.
If you have any other questions, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner