Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations, private schools, and churches; Foundation promoting vocational-technical education
Topic
Taxability of Persons and Transactions
Date Issued
11-17-1994
November 17, 1994
Re: Request for Ruling: Retail Sales and Use Tax
Dear***************
This will reply to your letter of October 31, 1994 in which you request a ruling on the application of the sales and use tax to purchases made by the ***********(the "Taxpayer" ) .
FACTS
The Taxpayer is a nonprofit foundation operated exclusively to promote and advance interests of vocational-technical education in the public schools of the area served by the ***************Specifically, the foundation provides a vehicle by which students in vocational training can construct a house as a class project. This is done over a two year period and, upon completion, the house is sold. Any profit realized is funneled back into the next project or to fund additional instructional activities. All duties are carried out by volunteers or by school system employees.
You request that the Taxpayer be permitted to purchase any materials and supplies with foundation funds exempt from the sales and use tax.
RULING
There is no general exemption from the Virginia retail sales and use tax for nonprofit organizations. The only exemptions from the tax are set out in Code of Virginia §§ 58.1-609.1 through 58.1-609.13. The Virginia courts have consistently required strict construction of these exemptions, i.e., where there is any doubt as to the application of an exemption, the doubt is resolved against the one claiming the exemption. See Golden Skillet Corporation v. Commonwealth, 214 Va. 276, 199 S.E.2d 511 (1973).
Code of Virginia §58.1-609.4(2) provides an exemption for sales of tangible personal property to nonprofit schools, colleges or other institutions of learning for their use or consumption and paid for out of their funds. In this case, the Taxpayer is not a nonprofit school, college or other institution of learning, but rather an independent corporation operated exclusively to promote vocational education. Therefore, the exemption is inapplicable under the doctrine of strict construction. Furthermore, Virginia Regulation (VR) 630-10-96 clarifies that sales to independent associations, whether or not affiliated with a nonprofit institution of learning, are subject to the tax.
While I am mindful of the worthwhile purpose that the Taxpayer serves, absent a statutory exemption what would allow the Taxpayer to make purchases exempt of the tax, the department has no authority to grant such an exemption. Therefore, the Taxpayer is required to pay the tax to its vendors on all purchases of tangible personal property. If a vendor is not registered to collect the tax, the Taxpayer must report and pay use tax on a consumer use tax return, Form ST-7.
Enclosed is a questionnaire for legislative consideration of a sales and use tax exemption request and Tax Bulletin 94-13, which explains the procedure and information required. If you are interested in pursuing exemption legislation during the 1995 General Assembly Session, the questionnaire should be completed and forwarded to the legislator who will sponsor the bill for exemption. The legislator must sign the questionnaire and submit it to the department by December 1.
If you have any questions regarding this matter, you may contact*************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8623F
Rulings of the Tax Commissioner