95-290 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Government transactions; Purchases necessary to fulfill a federal contract

Topic

Taxability of Persons and Transactions

Date Issued

11-09-1995

November 9, 1995

Re: Ruling Request: Retail Sales & Use Tax

Dear*************

This will reply to your request for a ruling regarding an exemption from the payment of the retail sales and use tax on the purchase of property, services or other items by ******** (the "Taxpayer") necessary to fulfill its contract with the United States Department of Labor Job Corps Program.

In your letter, you referred to the wording of Title 29, U.S.C., 1707 (c) which provides that:

- Transactions conducted by a private for-profit contractor or a nonprofit contractor in connection with the contractor's operation of a Job Corps Center, program, or activity shall not be considered as generating gross receipts....Such contractors shall not be liable to any State or subdivision thereof to collect or pay any sales, excise, use, or similar tax imposed upon the sale to or use by such contractors of any property, service, or other item in connection with the operation of a Job Corps Center, program, or activity.

While the department's regulations do not specifically address Job Corps contractors, Virginia Regulation (VR) 630-10-45, with the exception of Part IV, (copy enclosed), is applicable in this case. In detailing the applicability of the sales tax to transactions involving the federal government, this regulation specifically requires that the transaction must be pursuant to an official government purchase order, or must be paid out of public funds in order to be considered an exempt transaction.

Accordingly, in order for a transaction to be exempt in this case, the transaction must be in conjunction with an official purchase order of the Taxpayer to be paid out of the Taxpayer's funds, with such purchase order specifying that the purchase is in connection with the Taxpayer's provision of services in its contract with the Job Corps Center, program, or activity.

It should be noted that the tax is applicable when sales are made to the Taxpayer without the required purchase order and not paid for by the Taxpayer's funds. If the Taxpayer's employee is traveling on Taxpayer business in connection with the services related to the Job Corps Center, program, or activity and payment is made directly by the Taxpayer pursuant to a purchase order (e.g., by direct billing to the Taxpayer, or by use of the Taxpayer's credit card issued to such employee), no tax will apply. However, if the employee pays for meals and lodging with personal funds and will be reimbursed by the Taxpayer or utilizes a travel advance, no exemption is available even though the employee may be traveling on Taxpayer business in connection with services related to the Job Corps Center, program, or activity.

The Taxpayer should present a copy of this letter to its Virginia vendors, as evidence of exemption, when making purchases pursuant to its contract with the United States Department of Labor in connection with its contract with the Job Corps Center, program, or activity. All other purchases unrelated to the Job Corps Center contract will remain taxable.

If you have any additional questions, please contact either the department's********* District Office, *************or*********, Office of Tax Policy, *****************.

Sincerely,

Danny M. Payne
Tax Commissioner

OTP/9708Q

Rulings of the Tax Commissioner