Tax Type
Retail Sales and Use Tax
Description
Direct payment permits; Retirement community
Topic
Returns/Payments/Records
Date Issued
12-01-1995
December 1, 1995
Re: Request for Ruling: Retail Sales and Use Tax
Dear**************
This will respond to your letter of September 11, 1995, requesting a ruling on a proposed method of paying the retail sales and use tax by******* (the "Taxpayer").
FACTS
The Taxpayer is a nonprofit retirement community which will be opening a licensed, nonprofit assisted living unit within the Taxpayer's retirement community. According to the Taxpayer, the assisted living unit is presently undergoing licensing by the Virginia Department of Social Services as an adult care residence as defined under Code of Virginia § 63.1-172. Although purchases of tangible personal property by the Taxpayer's retirement community are not entitled to any exemption from the retail sales and use tax, the Taxpayer indicates that purchases of tangible personal property for use or consumption in the adult care residence should be eligible for the sales and use tax exemption granted by Code of Virginia § 58.1-609.8(10).
Since the Taxpayer will be stocking goods pending actual use in either taxable or exempt activities, and will use some non-consumable goods in both taxable and exempt activities, the Taxpayer believes that it will be impossible to determine the taxability of purchases at the order Point. Therefore, the Taxpayer requests permission to purchase all goods exempt of the tax and to report and remit the use tax for (i) single purpose items (e.g., consumables) based on a monthly allocation for taxable expenses, and (ii) dual purpose items (e.g., maintenance equipment) based on (a) the percentage of time that a particular item is used in a taxable manner or (b) some other reasonable proration method.
RULING
Code of Virginia § 58.1-609.8(10) provides an exemption from the retail sales and use tax for "[t]angible personal property for use or consumption by a licensed nonprofit adult care residence as defined in § 63.1-172" of the Code of Virginia. Based on the information presented, and provided the Department of Social Services grants a license to the Taxpayer to operate an adult care residence, the Taxpayer's assisted living unit will qualify for the above cited exemption.
Concerning the Taxpayer's tax payment proposal, it is similar to those requests received by the department for direct payment permits. Code of Virginia § 58.1-624 (copy enclosed) is the only statute which sets out provisions for a direct payment permit. Unfortunately, this statute restricts the issuance of direct
payment permits to manufacturers, mine operators, public service corporations, and those persons who store tangible personal property in Virginia for use both within and outside Virginia. Since the Taxpayer is not a manufacturer, mine operator, or public service corporation, and is not storing tangible property as described above, and as there is no other statutory provision to allow the Taxpayer to operate under its proposed direct payment method, the department has no legal authority to grant a direct payment permit, or any similar arrangement, to the Taxpayer. Accordingly, I regret that I cannot honor the Taxpayer's request in this instance.
However, if the Taxpayer can segregate those items which will be used or consumed solely in exempt activities, it can purchase such items exempt of the tax using a certificate of exemption, Form ST-13 (copy enclosed, see item number 14). If the Taxpayer cannot identify, at the time of purchase, those items which will be used or consumed in exempt activities, the Taxpayer must pay the Virginia sales tax but may seek a refund of the overpaid sales tax from vendors, based upon reasonable proration methods and adequate and complete documentation supporting each refund request. The Taxpayer should keep such documentation for at least 3 years.
If you have any questions regarding this matter, please contact*************at**************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10198R
Rulings of the Tax Commissioner