Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations, private schools, and churches; Organizations for the mentally and physically disabled
Topic
Taxability of Persons and Transactions
Date Issued
01-05-1994
January 5, 1994
Dear***************
This is in reply to your letter in which you request a ruling concerning whether your organization qualifies for exemption from the sales and use tax.
FACTS
* * * (the "Taxpayer') is a nonprofit organization exempt from income taxation under Section 501(c)(3) of the Internal Revenue Code. It provides independent living skills training, peer counseling, advocacy, and information and referral to people with severe physical and mental disabilities. The majority of its funding is received from federal, state and local grants, subsidies, and appropriations. The Taxpayer is seeking an exemption pursuant to subdivision 3 of Va. Code § 58.1-609.4 or Va. Code § 58.1-609.8 so that it and eight similar centers across the state can purchase items without paying the Virginia Retail Sales and Use Tax.
RULING
There is no general exemption from Virginia Retail Sales and Use Tax for nonprofit organizations. The only exemptions are those set out in Va. Code Secs. 58.1-609.1 through 58.1-609.13. While I am mindful of the worthwhile purpose the Taxpayer serves, absent a statutory exemption that would allow the Taxpayer to make purchases exempt from the tax, the department has no authority to grant such an exemption.
Subdivision 3 of Va. Code § 58.1-609.4 provides an exemption for:
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 that such property is used exclusively for the purpose set forth herein and that such organization receives no more that fifty percent of its total funding from federal, state or local governments. (Emphasis added.)
Based upon the doctrine of strict construction adopted by the Virginia courts in interpreting statutory sales tax exemptions, an organization must meet all criteria set forth in the statute before the exemption can apply. From the facts presented, the Taxpayer is not eligible for this exemption since (1) it is not organized exclusively for providing education, training, and services to retarded citizens (its activities relate to a broader class of individuals) and (2) it receives more than fifty percent of its total funding from the federal state and local governments. In addition, there are no other exemptions set forth in Va. Code § 58.1-609.8 which would apply to your organization.
Therefore, the Taxpayer is required to pay the tax to the retailer on all purchases of tangible personal property 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 use tax on a Consumer Use Tax Return, Form ST-7.
If you have additional questions, please contact the department.
Sincerely
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner