Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations, private schools, and churches; Nonprofit hospital
Topic
Taxability of Persons and Transactions
Date Issued
12-30-1994
December 30, 1994
Re: §58.1-1821 Application: Sales and Use Tax
Dear***************
This will reply to your letter of October 1, 1993 in which you seek correction of sales and use tax assessed to ********* ("Taxpayer 1" and a related corporation, ********* ("Taxpayer-2").
FACTS
Taxpayer 1 a non-profit hospital. An audit for the period September, 1990 through July, 1993 resulted in an assessment for its failure to report certain taxable sales and to remit tax on purchases of (1 ) catered meals furnished to employees and committee members while engaged in meetings at the hospital and (2) employee service awards. Taxpayer-1 protests the tax assessed on its purchases.
Taxpayer-2 is a building rental agent affiliated with Taxpayer-1. An audit for the period October, 1989 through July, 1993 resulted in an assessment for failure to pay tax on certain equipment and landscaping purchases. Taxpayer-2 protests the tax assessed on a lump-sum amount charged by the vendor for landscaping.
DETERMINATION
I will separately address below the issues raised in your letter.
Catered Meals
Taxpayer-1 claims that the provision of catered meals to its staff and committee members plays an integral part in its staff meetings and should therefore qualify for the exemption under Code of Virginia 158.1-609.7 (4) for purchases of tangible personal property for use or consumption by a nonprofit hospital. However, the purchase of taxable services, such as meals, is not specifically exempted by the above cited statute. Accordingly, nonprofit hospitals are liable for the tax on purchases of meals and other taxable services. This has been the long-standing policy of the department. See PD's 89-201 (7128/89) and 89-291 (10127/89), copies enclosed. Also see Virginia Regulation 630-10-74 (2), copy enclosed. Therefore, I find no basis to remove the catered meals from the audit.
Service Awards and Retirement Gift
Taxpayer-1 asserts that it uses employee service awards (plaques, certificates, cups and other tangible awards and gifts) to promote employee morale and therefore claims that such awards should qualify for the above cited exemption. Based on the facts presented, I find that these awards and gifts are used by Taxpayer-1. Accordingly, these items will be removed from the audit.
Landscaping Charge
While initially billed on a lump-sum basis, the vendor has furnished a revised invoice showing the separate amounts actually billed for plant materials, installation labor and tax. Based on this information, we will revise Taxpayer-2's audit to remove this charge from the audit.
Based on all of the foregoing, the assessments will be adjusted to remove the landscaping charge, employee service awards and retirement gifts, but is correct in all other respects. The Taxpayers will receive a revised "Notice of Assessment" as soon as practicable. If you have any questions regarding this determination, please contact***************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8874R
Rulings of the Tax Commissioner