Tax Type
Retail Sales and Use Tax
Description
Nonprofit Organizations, Pediatric Health Care Provider and Affiliates
Topic
Taxability of Persons and Transactions
Date Issued
11-04-1992
November 4, 1992
Re: Request for Ruling; Retail Sales and Use Tax Exemption
Dear**************
This will reply to your letter of February 19, 1992, in which you request a ruling confirming an exemption from the Virginia sales and use tax on purchases made by**************(the "Taxpayer") and its affiliates.
FACTS
The Taxpayer and its affiliates are nonprofit organizations exempt from income taxation under §501(c)(3) of the Internal Revenue Code. The Taxpayer promotes pediatric health care by providing hospital care services on an inpatient and outpatient basis, together with auxiliary services. It provides its services to children without regard to race, religion, national origin, or ability to pay in specific cases of financial need. The function of each of the affiliates of the Taxpayer is to support the operations and exempt purposes of the Taxpayer.
You request a ruling that the purchases of the Taxpayer and the separately incorporated affiliates are exempt from the sales and use tax, because all the entities are nonprofit organizations and are an integral part of the Taxpayer.
RULING
Va. Code §58.1-608(7)(d) provides a sales and use tax exemption for tangible personal property for use or consumption by a nonprofit hospital or a nonprofit licensed nursing home.
Based on the purpose of the organization as outlined in the documentation you have provided, I find that this organization qualifies for the exemption cited above. Please note that this exemption applies only to tangible personal property purchased for use and consumption by the Taxpayer.
This organization, which is an outpatient clinic, is not separately incorporated but rather is a part of the nonprofit hospital. Under Virginia Regulation (VR) 630-10-47(D), a clinic that is an integral part of a hospital conducted not for profit qualifies for a sales and use tax exemption. From the information provided, I find that this organization qualifies for the exemption under Va. Code
§58.1-608(7)(d). Please note that this exemption applies only to tangible personal property purchased for use and consumption by the Taxpayer.
Affiliates: Virginia law does not provide a general exemption from the sales and use tax for nonprofit organizations. The only exemptions from the tax are set out in Va. Code §58.1-608.
Under principles established by the courts, taxation is the rule and exemption is the exception. Therefore, exemptions from the sales and use tax are strictly construed. See VR 630-10-35.2. Based on the facts as presented, the remaining affiliates are not eligible for the exemption under Va. Code §58.1-608(7)(d) and are not eligible for any other exemption under Va. Code §58.1-608. The fact that the remaining affiliates are a part of the hospital structure which is operated on a nonprofit basis does not make these separately incorporated entities eligible for an exemption. Therefore, they are required to pay the tax to 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 corporations must report and pay the use tax on a Consumer Use Tax Return, Form ST-7.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/605OF
Rulings of the Tax Commissioner