93-51 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Private nonprofit organization; Exemptions strictly construed

Topic

Exemptions

Date Issued

03-05-1993

March 5, 1993

Re: §58.1-1821 Application: Retail Sales & Use Tax

Dear******************

This will reply to your letter of April 27, 1992 in which you seek a correction of a sales and use tax assessment to your organization, the*************(the "Taxpayer") for the period January 1, 1986 through December 31, 1991.

FACTS

The Taxpayer is a private nonprofit organization exempt from taxation pursuant to I.R.C. 501(c)(3) and organized to promote, coordinate and encourage interest and participation in all of the arts and related activities. You seek abatement of the tax and interest for the first three years of the assessment since "normal Department is to only audit the three years' purchases." Furthermore, for the period July 1, 1989 through December 31, 1991 you contend that all assessed charges should be abated since the Taxpayer qualifies for exemption under Va. Code §§58.1-608(A)(9)(h) (effective July 1, 1989) and 58.1-608(A)(4)(m) (effective July 1, 1990).

DETERMINATION

Va. Code §58.1-608(A)(4)(m) provides an exemption from the retail
sales and use tax for:

- Tangible personal property purchased for use or consumption by a organization exempt from taxation under § 501(c)(3) of the Internal Revenue Code and organized primarily for the purpose of operating an arts center offering a year round schedule of art education classes for adults and children, a continuous series of exhibits on twentieth arts, and a wide-range of seminars for the public at no or nominal charge.

To qualify for this exemption, an organization meet all of the criteria set forth above. Specifically, it must:

- _ be nonprofit,
  _ operate an arts center offering: a year-round schedule of art education classes for adults and children, and a continuous series of exhibits focusing on twentieth century art, and
  _ sponsor a wide range of seminars for the public at no or nominal charge.

A review of the information provided, however, reveals that the Taxpayer does not meet all of the above criteria. Specifically, it does not operate an arts center offering a year-round schedule of art education classes for adults and children and a continuous series of exhibits focusing on twentieth century art. While it operates a center a year-round schedule of programs/classes/services in the arts and may coordinate rotating exhibits of 2Oth century art, the Taxpayer's center itself does not offer the classes and house a continuous series of exhibits.

Va. Code §58.1-608(A)(9)(h) provides an exemption from the tax for:

- Tangible personal property purchased for use or consumption by a nonprofit cultural organization exempt from taxation under §501(c)(3) of the Internal Revenue Code, which educates children about the arts, humanities and nature on a regular basis through museum exhibits, classes and Performance.

While the Taxpayer offers programs for children and devotes more than half of its annual budget to programs geared to the area's youth, and while its events are regularly scheduled annually), the events are not offered on a regular basis as they are at a museum which is geared especially for children and as envisioned by the exemption. Further, from the information provided, it appears that the Taxpayer generally acts to coordinate and sponsor events rather than offer classes and exhibits as mandated by the specific exemptions.

You should note that under principles established by the courts, exemptions from the sales and use tax are strictly construed.

Accordingly, since the Taxpayer does not qualify for exemption from the sales and tax under the above or any other sales tax exemption, I find no basis for waiving the tax and interest assessed for the period July 1, 1989 through December 31, 1991. I, however, will agree to waive the tax and interest assessed for the first three years of the audit period - January 1, 1986 through December 31, 1988.

A revised Notice of Assessment will be mailed to the Taxpayer as soon as practical.

Sincerely,

W. H. Forst
Tax Commissioner

OTP/6145H

Rulings of the Tax Commissioner