Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations, private schools, and churches; Nursing home and retirement community
Topic
Taxability of Persons and Transactions
Date Issued
03-04-1993
March 4, 1993
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear*************
This will reply to your letter of April 6, 1992 in which you seek correction of a retail sales tax assessment for********* (the "Taxpayer").
FACTS
The Taxpayer is a nonstock, nonprofit life care facility organized to operate a licensed nursing home and to provide a retirement community consisting of a nursing home, adult apartments and cottages on the same premises. The Taxpayer's main building houses the licensed nursing home and adult apartments which are licensed separately as a home for adults by the Virginia Department of Social Services (DSS). The cottages are separate structures and are not licensed as a home for adults by DSS.
The Taxpayer was audited and sales tax was assessed on the portion of its purchases of tangible personal property. You contend that the assessment is erroneous, claiming that the property is principally used in an exempt way; therefore, the Taxpayer's incidental use of the property in a non-exempt manner (non-licensed cottages) should not cause any portion of it to become subject to taxation.
DETERMINATION
Va. Code §58.1-608(A)(8)(j) provides an exemption from the retail sales and-use tax for "[t]angible personal property for use or consumption by a licensed nonprofit home for adults as defined in §63.1-172..." (Emphasis added) Va. Code §63.1-172 defines "home for adults" as including "any place, establishment, or institution, public or private, operated or maintained for the maintenance or care of four or more adults who are aged, infirm or disabled."
Prom the information provided, it is evident that not all the purchases by the Taxpayer are for use or consumption by the licensed nonprofit home for adults (i.e., the adult apartments). A portion of the purchases are for use or consumption by the cottages, which are not a part of the licensed nonprofit home for adults. These purchases do not qualify for the exemption under Va. Code §58.1-608(A)(8)(j). The fact that the purchases consumed by cottage residents cannot be clearly identified does not relieve the Taxpayer of its responsibility of paying the sales tax on such purchases.
Because the Taxpayer could not identify which purchases were consumed by cottage residents, the auditor prorated the tax. The auditor applied a percentage (cottage residents to total residents) to the cost of tangible personal property available for use by all residents of the Taxpayer's retirement community. This method of proration was reasonable, considering the Taxpayer's inability to provide the necessary information.
You cite Mead Corp. v. Glander, 153 Ohio St. 539, 93 N.E.2d 19, (1950) to support your position that where one piece of property is used for both exempt and nonexempt purposes, there is no authority to split the piece of property and tax the taxable portion. However, the Mead case was overruled by Semac Industries, Inc. v. Collins, 48 Ohio St.2d 4, 354 N.E.2d 922 (1976). Therefore, I do not find the Mead case persuasive.
You also cite Spaulding, et al. v. City of Rutland, 3 A2d 556 (Vt. 1939) as authority for the proposition that where there is no way to distinguish an exempt from a nonexempt part of one piece of property, the whole property is tax exempt. Virginia has never followed this position but instead follows the doctrine of strict construction established by the Virginia Supreme Court with respect to exemptions from taxation. Under this doctrine, exemption from taxation is the exception, and where there is any doubt, the doubt is resolved against the one claiming exemption. See Golden Skillet Corporation v. Commonwealth, 214 Va. 276, 199 S.E.2d 511 (1973).
Accordingly, the assessment, which has been paid in full, is correct. Therefore, no refund will be issued.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6096F
Rulings of the Tax Commissioner