Tax Type
Retail Sales and Use Tax
Description
Public school fund raising auction
Topic
Taxability of Persons and Transactions
Date Issued
11-09-1995
November 9, 1995
Re: Request for Ruling: Retail Sales and Use Tax
Dear****************:
This is in response to your letter of March 2, 1995 regarding the application of the retail sales and use tax to sales made by *************** (the Taxpayer) of surplus property. Specifically, you ask if the Taxpayer is required to collect the tax on these sales.
FACTS
The Taxpayer is a public school system which each year has a sale to dispose of surplus equipment. This sale is made through public auction and is conducted by an auctioneer. In past years the auction was called by a volunteer who was an employee of the school system. Currently, the Taxpayer uses the services of professional tobacco auctioneers who are either paid a flat salary by the Taxpayer or who volunteer their services. In either case, however, the auction is organized and conducted by the Taxpayer and all money from the sale is collected by school system employees. Also, all of the proceeds are returned to the school board's account for use in operating the school system.
RULING
-
- Code of Virginia § 58.1-609.4(8) provides an exemption from the tax for:
Tangible personal property purchased for use, consumption, or sale at retail by an elementary or secondary school conducted not for profit, ... for use in fund-raising activities, the net proceeds (gross receipts less direct expenses) of which are contributed directly to the school or used to purchase certified school equipment.... (Emphasis added)
- Code of Virginia § 58.1-609.4(8) provides an exemption from the tax for:
In Public Document 88-93 (5/10/88), the department determined that the exemption can extend to a school system which conducts its own fund-raising activities. In that case sales were made by the school system itself through vending machines. Therefore, it is clear that if the school system is making the sale, the exemption applies.
The department has also determined that under very limited circumstances an auctioneer may make sales without collecting the tax. Auctioneers are normally considered to be in the business of selling tangible personal property and must generally collect the tax on the gross sales price of each taxable sale. In the instant case, however, the auctioneer is merely calling the sale free of charge or for a flat salary and has no other obligations concerning the auction. Under this specific scenario the auctioneer is not required to collect the tax on sales of surplus equipment. Further, and pursuant to the school fund-raising exemption set out in § 58.1-609.4(8), the Taxpayer is not required to collect the tax on these sales.
As a precaution, however, any increased activity or responsibility by the auctioneer may create a taxable transaction. For example, as addressed in Public Document 88-335 (12/20/88), the auctioneer would be required to collect the tax if he: (i) is responsible for conducting the auction; (ii) has control over collection of the proceeds or other direct association with the money being collected, or (iii) is responsible for clerking the sale. In these instances the sale is taxable since it is the auctioneer, and not the school, making the sale.
Also, § 58.1-609.4(8) specifies that the gross proceeds must be contributed directly to the school or used to purchase certified school equipment. Any other use of the proceeds would nullify this exemption. Furthermore, the fund-raising exemption applies to specific retail sales by nonprofit schools and school systems, and does not apply to auctions or sales by other nonprofit organizations or local governments. Accordingly, the exemption does not extend to sheriffs' sales, surplus property sales conducted by nonschool agencies, etc.
I trust that this information addresses your concerns. However, if you have any additional questions, please contact**************in my Office of Tax Policy at**************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9415I
Rulings of the Tax Commissioner