Tax Type
Retail Sales and Use Tax
Description
Research, Development and Education Association
Topic
Exemptions
Date Issued
03-20-1991
March 20, 1991
Re: Request for Ruling: Retail Sales and Use Tax
Dear***************
This will reply to your letter of June 11, 1990, on behalf of************* (the Taxpayer), requesting a ruling on whether the organization qualifies for an exemption from Virginia retail sales..and use tax.
FACTS
The Taxpayer is a nonprofit organization exempt from income taxation under § 501(C)(3) of the Internal Revenue Code. The Taxpayer is organized to provide a mechanism through which colleges and universities, other research facilities, and the U. S. government may cooperate to further space science and technology and to acquire, plan, construct, and operate laboratories and facilities for research, development, and education associated with space science and technology. The center in Virginia is the Institute for Computer Applications in Science and Engineering located at**********in****************. This center conducts unclassified basic research in applied mathematics, numerical analysis, and computer science. The Taxpayer is seeking an exemption for tangible personal property purchased in performance of this work.
RULING
There is no general exemption from Virginia sales and use tax for nonprofit organizations. The Taxpayer would have to qualify for one of the exemptions set out in Va. Code §58.1-608 (copy enclosed) in order to make purchases exempt of the tax.
While Va. Code §58.1-608-(1)(e) provides an exemption for tangible personal property purchased by the federal government the Taxpayer is not eligible for this exemption based on the facts presented by the Taxpayer. Persons who contract with the federal government to perform a service and in conjunction with the service furnish some tangible personal property are deemed to be the consumers of all such property and are not entitled to exemption on the grounds that a governmental entity is party to the contract.
Further, based on the enclosed P.D. 87-132 (4/21/87) to a similar organization. the Taxpayer does not qualify for exemption as an institution of learning under Va. Code §58.1-608(4)(b).
Va. Code §58.1-608(3)(e) does provide an exemption for "[t]angible personal property purchased for use or consumption directly and exclusively in basic research or research and development in the experimental or laboratory sense." (Emphasis added). Virginia Regulation (VR) 630-10-92 (copy enclosed), interpreting Va. Code §58.1-608(3)(e), defines "basic research" as "a systematic study or search in a scientific or technical field of endeavor with the ultimate goal of advancing knowledge or technology in that field."
In order for an item of tangible personal property to qualify for this exemption, the item must be used solely in the exempt research activities. Items that are used in both exempt and nonexempt activities in connection with the research are not used directly and exclusively in research activities and are therefore subject to the lax. An example of an item that would not qualify would be a computer that was used by support personal in administrative duties as well as in the actual research. VR 630-10-92 provides an exemplary list of taxable and exempt items used in research activities.
Based on the facts presented, and the above referenced regulation, the Taxpayer in this case qualifies for exemption from the sales and use tax when purchasing items for direct and exclusive use in basic research. As noted, the exemption is limited in its application and therefore. does not apply to all tangible personal property purchased by the Taxpayer. In order to claim the exemption, the Taxpayer must provide its vendors with a copy of the enclosed certificate of exemption (Form ST-11).
If you have any further questions. please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner