Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations, private schools, and churches; Substance abuse treatment center
Topic
Taxability of Persons and Transactions
Date Issued
03-26-1993
March 26, 1993
Re: §58.1-1821 Application: Sales and Use Tax
Dear*********************
This will reply to your letter of July 2, 1992 in which you seek relief on behalf of your client, ********* (the Taxpayer), from a recent sales and use tax assessment for the period January 1, 1990, through August 31, 1991.
FACTS
The Taxpayer is a nonprofit organization exempt from federal income taxation under Internal Revenue Code §501(C)(3). The primary function of the Taxpayer is to provide comprehensive inpatient and outpatient services to individuals with chemical dependencies. These services include medical detoxification, group therapy, counseling, and education. The Taxpayer employs addiction counselors, registered nurses, physicians, and professional consultants. The inpatient program varies from 21 to 28 days with emphasis on education, group and individual counseling, and self-help groups such as Alcoholic's Anonymous and Narcotics Anonymous. The outpatient program offers the same counseling as the inpatient program, but is geared to those patients who cannot stay overnight.
Prior to January 1, 1990, the Taxpayer operated as an unincorporated unit of a corporate entity which controlled four nonprofit hospitals. The Taxpayer was located within one of the hospitals and operated under the umbrella of the hospital, thus assuming the hospital's exempt status. Subsequent to January 1, 1990, the Taxpayer transferred its administrative responsibility to another corporate entity which is not licensed as a nonprofit hospital, and continued to operate its inpatient programs within the confines of a licensed hospital. In addition, the Taxpayer continued to assume its tax exempt status. The Taxpayer is taking exception with the audit findings contending that its basic mode of operation remained the same, despite the transfer of administrative responsibilities.
DETERMINATION
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 nonprofit nursing home. In order to qualify as a hospital, an organization must be licensed with the Virginia Department of Health. While I am aware that the Taxpayer is licensed by the Virginia Department of Mental Health and Mental Retardation as an intermediate care facility and outpatient treatment service, such accreditation does not qualify the Taxpayer as a hospital.
In addition, there is no general exemption from the Virginia retail sales and use tax for nonprofit organizations (see Virginia Regulation (VR) 630-10-74 enclosed). The only exemptions from the tax are set forth in Va. Code §58.1-608. Therefore, due to the fact the Taxpayer does not meet the qualification for exemption as a nonprofit hospital, nor as a nonprofit organization, I must deem the audit finding to be correct and the assessment to be due and payable in full.
If you should have any further questions, please feel free to contact this office.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6356K
Rulings of the Tax Commissioner