Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations, Exempt status
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
11-03-1995
November 3, 1995
Re: Ruling Request: Sales and Use Tax
Dear******************:
This will respond to your letter of October 2, 1995 seeking a ruling on whether*********("Taxpayer") qualifies for an exemption from state taxes.
FACTS
The Taxpayer is a nonprofit volunteer association exempt from income taxation under § 501 (c) (3) of the Internal Revenue Code and organized to establish a professional and business network of Ukrainian-Americans, promote the human and civil rights of Ukrainians, eliminate discrimination and prejudice aimed at Ukrainian-Americans, promote a greater understanding of Ukrainian history and culture among Americans, and encourage active participation of Ukrainian-Americans in promoting the welfare of the community. The Taxpayer has no employees.
The Taxpayer asks whether it (i) qualifies for any exemption from the state taxes administered by the Department of Taxation and (ii) is excluded from any reporting requirements.
RULING
Corporation Income Tax
Code of Virginia § 58.1-401 and Virginia Regulation (VR) 630-3-401(F), copies enclosed, exempt from the state income tax nonprofit corporations which are exempt from federal income tax under IRC § 501 (c) (3).
Based on the determination by the Internal Revenue Service that the Taxpayer qualifies for exemption from federal income tax under IRC § 501 (c) (3), and the Virginia statute and regulation cited, the Taxpayer qualifies for exemption from Virginia income tax. Even though exempt from Virginia income tax, if the Taxpayer were to become organized under the laws of Virginia, or have income from Virginia sources related to its charitable purposes, the Taxpayer is not excluded from the income reporting requirements of Code of Virginia § 58.1-441 (copy enclosed). Also see VR 6303-401(A). In the event that the Taxpayer has unrelated business taxable income as defined in IRC § 512 from Virginia sources, it must file a Virginia return (Form 500) and pay Virginia income tax on such income.
Qualification for tax exempt status in Virginia is dependent upon continued status as a tax exempt organization by the Internal Revenue Service. Loss of federal status would void the analogous Virginia status.
Although the Taxpayer is exempt from the Virginia corporate tax on income it may receive, it is not exempt from the requirement that it withhold Virginia individual income tax from any wages of employees hired by the Taxpayer who perform any services in Virginia for wages.
Retail Sales and Use Tax
There is no general exemption from the Virginia retail sales and use tax for nonprofit organizations. See VR 630-10-74 of the enclosed comprehensive set of Virginia Retail Sales and Use Tax Regulations. The only exemptions from the tax are set out in Code of Virginia §§ 58.1-609.1 through 58.1-609.13, copy enclosed. 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.
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 tangible personal property purchased in Virginia for which title or possession to the property passes to the Taxpayer in Virginia. [In Virginia, charges for meals and lodging are also subject to the retail sales and use tax; therefore, the Taxpayer must pay the sales tax on such charges.] However, if title or possession to the property being purchased passes to the Taxpayer outside of Virginia and no use of the property is made within Virginia, the purchase will not be subject to the Virginia retail sales and use tax. See VR 630-10-51.
If a Virginia vendor fails to charge the sales tax on a taxable sale, the Taxpayer is liable for payment of the use tax and reporting it to the department on a consumer use tax return, Form ST-7. If the Taxpayer were to engage in making retail sales of tangible personal property in Virginia on a regular basis, it must register as a dealer to collect, report and remit the sales tax to the department.
Enclosed is a questionnaire for legislative consideration of a retail sales and use tax exemption request and Tax Bulletin 94-13 which explains the procedure and information required. If you are interested in pursuing legislation which would exempt the purchases discussed above, the questionnaire should be completed and forwarded to the legislator who will sponsor the bill for exemption. The legislator should sign the questionnaire and submit it to the department as soon as possible but no later than December 1. 1995.
Other Sales Taxes Administered by the Department of Taxation
The Taxpayer does not enjoy any exemption or exclusion on other taxes administered by the department merely because of the Taxpayer's nonprofit status. Therefore, if the Taxpayer purchases or is required to title a watercraft [as defined by Code of Virginia § 58.1-1401, copy enclosed] in Virginia, the Taxpayer is liable for the watercraft sales and use tax. The Taxpayer also is not entitled to an exemption from the aircraft sales and use tax for any aircraft purchased, or required to be licensed, in Virginia. If the seller does not charge the tax on a Virginia taxable purchase, the Taxpayer must file the appropriate return and pay the tax.
Taxes Administered by Other State Agencies
Motor vehicles purchased for highway use are subject to the motor vehicle sales and use tax administered by the Department of Motor Vehicles. Therefore, if you have any questions about such tax, please contact them. However, motor vehicles purchased in Virginia solely for off-highway use and which are not subject to the motor vehicle sales and use tax are subject to the retail sales and use tax. See VR 630-1067.
Locally Administered Taxes
By duly adopted ordinance, localities in Virginia may levy a transient occupancy tax, food and beverage tax, admissions tax and some other local taxes. For questions concerning whether the Taxpayer is exempt from any local levy imposed by a county, city or town, please contact the local Commissioner of the Revenue, Supervisor of Assessments or Director of Finance for the particular locality involved.
If you have any additional questions regarding state taxes administered by the Department of Taxation, please contact *************at**********.
Sincerely
Danny M. Payne
Tax Commissioner
OTP/10361R
Rulings of the Tax Commissioner