Tax Type
Retail Sales and Use Tax
Description
Publishing and broadcasting; Publisher's sales and purchases of supplies
Topic
Taxability of Persons and Transactions
Date Issued
11-06-1995
November 6, 1995
Re: Ruling Request: Sales and Use Tax
Dear******************
This will respond to your letter of October 3, 1995 seeking a ruling on whether************* (the "Taxpayer") qualifies for an exemption from the retail sales and use tax.
FACTS
The Taxpayer is a nonprofit organization exempt from income taxation under § 501 (c) (3) of the Internal Revenue Code and organized to provide for professional expression in both classified and unclassified military operations research, to improve and increase the effectiveness of military operations research, and to foster the development of the students of military operations research. The Taxpayer receives the majority of its funding under a sole-source government service contract; the remainder of its funding is derived from symposium registration fees.
According to the work statement of the contract, the Taxpayer is expected to furnish various services, including conducting surveys in military operations research; publishing and delivering classified proceedings; writing, editing, and preparing directories, technical reports, newsletters, and other written material; and planning and executing symposiums and other meetings on behalf of the federal government.
RULING
There is no general exemption from the Virginia retail sales and use tax for nonprofit organizations. See VR 630-10-74, copy enclosed. 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 all purchases of tangible personal property [except as indicated below] and taxable services (i.e., meals and lodging). 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.
Under principles established by the courts, persons who contract with the federal government, the state of Virginia or its political subdivisions to perform a service and in conjunction therewith furnish some tangible personal property, are deemed to be the consumers of all such property and are not entitled to exemption on the grounds that a governmental entity is a party to the contract. As the Taxpayer contracts with the federal government to provide those services set out in the FACTS section of this letter, the Taxpayer is deemed to be the taxable user or consumer of all tangible personal property used in performing its services, even though title to the property provided may pass to the government or the Taxpayer may be fully and directly reimbursed by the government, or both. See the enclosed revision of VR 630-10-45, specifically § 4.1, published in The Virginia Register of Regulations (4/4/94, Vol. 10, Issue 14, p. 3780).
However, pursuant to Code of Virginia § 58.1-609.6(3), the retail sales and use tax does not apply to the retail sale of publications issued daily, or regularly at average intervals not exceeding three months and which are available to the general public, except that newsstand sales of such publications are taxable. See VR 630-10-73, copy enclosed. Since the Taxpayer's is a written compilation of information available for sale to the general public and is published quarterly, subscription sales of such publication are not taxable, and purchases of items (paper, ink, etc.) which become part of this publication are not taxable. It is also my understanding that the Taxpayer is preparing a new journal for distribution on a quarterly basis to the general public. Provided the journal satisfies the criteria of the above cited regulation and statute, subscription sales of such publication will not be subject to taxation.
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 all purchases of tangible personal property, 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.
If you have any additional questions, please contact*******at*********.
Sincerely
Danny M. Payne
Tax Commissioner
OTP/10334R
Rulings of the Tax Commissioner