Tax Type
Retail Sales and Use Tax
Description
Nonprofit organization; Rule of strict construction for exemption
Topic
Exemptions
Date Issued
03-05-1993
March 5, 1993
Re: Request for Ruling: Retail Sales and Use Tax
Dear**********
This will reply to your letter of October 23, 1992 and subsequent correspondence whereby you request a ruling regarding the application of the retail sales and use tax to the ***********(the Taxpayer).
FACTS
The Taxpayer, a nonprofit organization exempt from taxation under § 501 (c) (3) of the Internal Revenue Code, is organized exclusively to provide job training and related services to the handicapped and disabled. The Taxpayer's activities are supported primarily by monies received from state, local and federal government agencies for services the Taxpayer provides to disabled clients.
You seek an exemption to allow the Taxpayer to purchase items exempt from the retail sales and use tax under Va. Code §58.1-608 (A)(4)(c).
DETERMINATION
Va. Code §58.1-608 (A)(4)(c) exempts from the retail sales and use
tax:
-
- Tangible personal property purchased by an organization exempt from taxation under §501 (c)(3) of the Internal Revenue Code and organized exclusively for the purpose of providing education, training and services to retarded citizens of the Commonwealth, provided such property is used exclusively for the purposes set forth herein and further provided that such organization receives more than fifty percent of its total funding from federal, state, or local governments. (emphasis added)
Under principles established by the courts, taxation is the rule and exemption is the exception. Therefore, the exemptions from the sales and use tax are strictly construed.
An examination of the Taxpayer's articles of incorporation reveals that the Taxpayer is organized to provide training and evaluation of handicapped persons. I understand, however, that the Taxpayer's services are available and provided to the physically disabled as well as to the mentally handicapped.
Accordingly, and applying the rule of strict construction for exemptions from taxation, the Taxpayer does not meet the mandated criteria under Va. Code §58.1-608 (A)(4)(c).
Notwithstanding the worthwhile purposes which the Taxpayer serves, absent a statutory exemption that would allow it to make purchases exempt of the tax, the department has no authority to grant an exemption. Therefore, the Taxpayer is required to pay the tax to the retailer if the retailer is registered to collect the tax. If the retailer is not registered to collect the tax, the Taxpayer must report and pay the tax directly to the department on a Consumer Use Tax Return, Form ST-7.
I regret that I am unable to provide you with a more favorable reply. If you have additional questions or if we may be of any further assistance, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6507I
Rulings of the Tax Commissioner