Tax Type
Retail Sales and Use Tax
Description
Construction; Construction materials
Topic
Taxability of Persons and Transactions
Date Issued
10-11-1995
October 11, 1995
Re: Request for Ruling: Retail Sales and Use Tax
Dear*****************
This will reply to your letter of September 5, 1995, in which you request a ruling on the application of the retail sales and use tax to certain transactions incurred by your client (the "Taxpayer").
FACTS
The Taxpayer, a nonprofit organization, provides home repairs for flood victims, disabled persons and other eligible persons. It receives grants from various state entities and community donations for flood relief and other disasters. The Taxpayer contracts with persons to perform services and, in some instances, pays for materials and labor. You would like a ruling on the application of the sales and use tax, particularly in regard to supplies used by the organization.
RULING
Purchase of Supplies Used by Taxpayer
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 § 58.1-609.8(48) provides an exemption for tangible personal property purchased for use or consumption by a nonprofit organization organized to repair or rehabilitate homes owned and occupied by low-income persons who could not otherwise afford to finance the rehabilitation or repair of their homes within the boundaries of the********* Planning District. Based on the information provided, the Taxpayer repairs homes for persons who are not necessarily low-income persons; furthermore, the Taxpayer is not within the boundaries of the********Planning District**************** counties). Therefore, the exemption is inapplicable under the doctrine of strict construction.
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 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.
Construction Materials Purchased by Taxpayer
The Taxpayer's purchases of tangible personal property to be used in real property construction are subject to the tax. If the Taxpayer does not pay the tax on the materials at the time of purchase (e.g., the vendor is not registered to collect the tax) and furnishes the materials to persons who contract to provide services, the contractor providing services is deemed to be the consumer of the property used and is liable for the use tax on the materials. The tax is based on the fair market value of the property used. Code of Virginia § 58.1-610(B).
It should be noted that the Taxpayer may be eligible for a refund of sales and use tax it pays on tangible personal property used to repair or rehabilitate homes owned and occupied by low-income persons, pursuant to Code of Virginia § 58.1-608.1.
have enclosed a copy of the statute for your review.
Purchases by Contractors
Code of Virginia § 58.1-610 treats every construction contractor as the taxable user or consumer of all tangible personal property purchased in connection with real property construction, reconstruction, installation, repair and similar contracts. The contractor is required to pay the sales tax on all materials at the time of purchase. If a supplier of a contractor doing work in Virginia does not collect the Virginia tax from the contractor, the contractor will be liable for the use tax on purchases from the supplier.
Legislative Request for Exemption
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, 1995.
If you have any questions regarding this matter, you may contact*************at***************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10185F
Rulings of the Tax Commissioner