Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations, Professional education association
Topic
Taxability of Persons and Transactions
Date Issued
10-04-1995
October 4, 1995
Re: Request for Ruling: Retail Sales and Use Tax
Dear****************
This will reply to your letter in which you seek a ruling on whether your organization, the "Taxpayer," qualifies for exemption from the retail sales and use tax.
FACTS
The Taxpayer, exempt from federal income taxation under § 501 (c)(3) of the Internal Revenue Code, is a professional educational association, comprised of principals, teachers and counselors. According to your organization's Articles of Incorporation, it is "committed to the improvement of secondary education" and is involved in activities such as "providing information and leadership; encouraging research and service; promoting high professional standards; focusing attention on national educational problems; and working with other professional organizations interested in the solution of problems of education at the national level."
You point out that one of your divisions is Student Activities through which the National Honor Society and Junior Honor Society are maintained. Furthermore, your organization sponsors leadership camps for students and student leaders, and offers several scholarship programs for students in secondary schools in the United States.
You suggest that your organization may qualify for exemption from the sales tax under Code of Virginia § 58.1-609.4(12).
DETERMINATION
Code of Virginia § 58.1-609.4(12) provides a sales and use tax exemption for:
Tangible personal property and services purchased for use by an organization exempt from taxation under § 501(c)(3) of the Internal Revenue Code, which is organized primarily for the purpose of encouraging participation in the free enterprise system through information programs directed to secondary schools and college students, college scholarship programs, and recognition of achievement in the American free enterprise system.
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 information provided, I am not convinced that the Taxpayer is organized "primarily" for the above cited purposes. While the Taxpayer may offer scholarship programs, sponsor leadership camps and organizations representing excellence in education and leadership, it appears that the primary purpose of the organization is not to encourage participation in the free enterprise system through the above means, but to promote secondary school education generally. Furthermore, it does not appear that the Taxpayer meets the exemption criteria of any other sales tax exemption.
Accordingly, while I am mindful of the worthwhile purpose that 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. The Taxpayer is required to pay the tax to retailers (or remit use tax to the department if the retailer is not registered for the collection of the tax) on all purchases of tangible personal property for its own use and consumption. Tangible personal property for resale, however, may be purchased exempt of the tax using a Form ST-10.
For your information, I am enclosing a copy of Tax Bulletin 94-13 which explains the process by which a nonprofit organization may seek statutory exemption from the sales and use tax. In addition, I am enclosing a copy of the questionnaire referenced in the Bulletin which should be submitted to the department by November 1 if the Taxpayer intends to seek legislation creating an exemption therefore during the 1996 General Assembly.
If you have any further questions about this, please contact ********* in the Office of Tax Policy at*******.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10028H
Rulings of the Tax Commissioner