Tax Type
Retail Sales and Use Tax
Description
Nonprofit Cooperative Preschool; Fund Raising Activities
Topic
Taxability of Persons and Transactions
Date Issued
03-04-1991
March 4, 1991
Re: Request for Ruling: Retail Sales and Use Tax
Dear******************
This will reply to your letter of December 27, 1990 in which you request a ruling on the applicability of the sales tax to sales by the *************(the "Taxpayer").
FACTS
The Taxpayer is a federally tax exempt nonprofit cooperative preschool serving the local needs of approximately 175 families annually. Parents own and operate the preschool and work in the classroom on a rotational basis with the teachers who have degrees in early childhood education.
The Taxpayer has fund-raising events organized and supported by its membership, the parents, which benefit the Taxpayer. Occasionally, outside organizations specializing in fund-raising packages supply the Taxpayer with items it can sell to its membership at a markup, for example, books for a book fair. The proceeds from such sales go directly to the Taxpayer. It requests a ruling as to whether it is required to collect sales tax from its membership with regard to this type of fund-raising activity.
RULING
Va. Code § 58.1-603 imposes the sales tax upon "every person who engages in the business of selling at retail or distributing tangible personal property in this Commonwealth." The term "sale at retail" is defined in Va. Code § 58.1-602 as "a sale to any person for any purpose other than for resale."
Generally, infrequent sales by nonprofit organizations are exempt from collection of the tax by virtue of the "occasional sale" exemption found in Va. Code § 58.1-608(10)(b). I have enclosed a copy of Virginia Regulation (VR) 630-10-75 which describes the occasional sale exemption. Under this exemption, an organization is not required to register and collect the tax, provided it conducts sales on three or fewer occasions during a one year period. However, nonprofit organizations are required to register and collect the tax when making sales of tangible personal property on a regular basis.
In the instant case, the fact that sales are made to your members has no bearing on the taxability of the sales. Through a conversation with a member of my Tax Policy Division staff, you indicated that the Taxpayer generally engages in three fund-raising activities each year. Thus, the Taxpayer is exempt from the collection of the tax on its sales yet is still required to pay the tax to its suppliers on all tangible personal property purchased for resale. If not paid to suppliers, the tax is required to be paid directly to the department on Form ST-7, a consumer use tax return, copy enclosed. Should the Taxpayer engage in more than three sales each year, it will be required to register as a dealer with the department and collect the tax when making such sales.
While Va. Code § 58.1-608(4)(h) provides an exemption from the sales and use tax for purchases and sales of tangible personal property in connection with fund-raising activities, the exemption is limited to the fund-raising activities of a nonprofit elementary or secondary school and school-affiliated organizations.
If you have any further questions regarding this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner