Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations, Youth recreational organization
Topic
Taxability of Persons and Transactions
Date Issued
08-04-1995
August 4, 1995
Re: Request for Ruling: Retail Sales and Use Tax
Dear*********
This will reply to your letter of July 11, 1995 in which you request a ruling on the application of the retail sales and use tax to purchases made by***************** (the "Taxpayer").
FACTS
The Taxpayer is a nonprofit organization serving youth in the 13 to 16 age range by providing organized and supervised recreation activities. The Taxpayer requests a ruling whether it qualifies for sales and use tax exemption provided in Code of Virginia § 58.1-609.8(11).
RULING
Code of Virginia § 58.1-609.8(11) provides an exemption from the retail sales and use tax for:
-
- [t]angible personal property purchased for use or consumption by or sold by a nonstock nonprofit charitable organization, exempt from taxation under §501(c)(3) of the Internal Revenue Code and from local real estate taxation which is organized exclusively to foster, sponsor and promote physical education, athletic programs and contests for youths in the Commonwealth. (Emphasis added)
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).
Based upon the strict construction used in interpreting sales and use tax exemptions, not all nonprofit organizations providing physical education and athletic programs for youth qualify for the above exemption. In order to qualify for the exemption, an organization must be (1) organized not-for-profit? (2) exempt from taxation under IRC § 501(c)(3), (3) exempt from local real estate taxation, and (4) organized exclusively for the stated purpose.
While the Taxpayer appears to satisfy the first, second and fourth requirements, it fails to meet the local real estate taxation requirement contained in the exemption. An exemption from local real estate taxation requires an act of the General Assembly; it is not sufficient that the organization is not subject to real estate tax because it does not own any real property. Thus, the Taxpayer fails to qualify for the exemption.
Furthermore, the Taxpayer does not qualify for the exemption provided in Code of Virginia § 58.1-609.8(35). That exemption, which became effective July 1, 1995, is available to organizations exempt from taxation under IRC 501(c)(3) and organized exclusively to foster, sponsor and promote sportsmanship, recreation and health through athletic programs and contests for youths within the boundaries of the Fifteenth Planning District established pursuant to § 15.1-1403. The Fifteenth Planning District includes the counties of Charles City, Chesterfield, Goochland, Hanover, Henrico, New Kent, and Powhatan and the city of Richmond. Because the Taxpayer does not serve youths within these areas, it does not qualify for this exemption.
While I am mindful of the worthwhile purpose which 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 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 the 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 1996 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 November 1.
If you have any questions regarding this matter, you may contact*******at******. .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9946F
Rulings of the Tax Commissioner