Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations; Lacrosse organization
Topic
Taxability of Persons and Transactions
Date Issued
12-12-1995
December 12, 1995
Re: Request for Ruling: Retail Sales and Use Tax
Dear********************:
This will reply to your letter of October 30, 1995, in which you request a ruling on the application of the sales and use tax to the****************(the "Taxpayer").
FACTS
The Taxpayer is a Virginia nonstock corporation exempt from federal income taxation under § 501(c)(3) of the Internal Revenue Code. The Taxpayer is organized to "encourage, foster and promote, through independent means, the sport of lacrosse, as played by both men and women, in the central Virginia area and to encourage the development of the sport at all levels throughout Virginia, the United States, and the World...." The Taxpayer is not affiliated nor does it purchase items for any schools or sports associations.
RULING
Code of Virginia § 58.1-609.8(11) provides an exemption from the retail sales and use tax for:
-
- [t]angible personal property purchased for use or consumption by or sold by a nonstock, nonprofit charitable organization, exempt from taxation under § 501(c)(3) of the Internal Revenue Code and from local real estate taxation, which is organized exclusively to foster, sponsor and promote physical education, athletic programs and contests for youths in the Commonwealth. (Emphasis added)
Based on the strict construction in interpreting sales and use tax exemptions, as consistently required by the Virginia courts, not all nonprofit organizations providing physical education and athletic programs for youth qualify for the above exemption. In order to qualify for the exemption, an organization must be (1) organized not-for-profit, (2) exempt from taxation under I.R.C. § 501(c)(3), (3) exempt from local real estate taxation, and (4) organized exclusively for the stated purpose.
While the Taxpayer appears to satisfy the first and second requirements, it fails to meet the local real estate taxation requirement contained in the exemption. An exemption from local real estate taxation requires an act of the General Assembly; it is not sufficient that the organization is not subject to real estate taxation because it does not own any real property. Thus, the Taxpayer fails to qualify for the exemption.
Furthermore, the Taxpayer does not qualify for the exemption provided in Code of Virginia § 58.1-609.8(35). That exemption, which became effective July 1, 1995, is available to organizations exempt from taxation under I.R.C. § 501(c)(3) and organized exclusively to foster, sponsor and promote sportsmanship, recreation and health through athletic programs and contests for youths within the boundaries of the Fifteenth Planning District established pursuant to § 15.1-1403. The Fifteenth Planning District includes the counties of Charles City, Chesterfield, Goochland, Hanover, Henrico, New Kent, and Powhatan and the City of Richmond. Because the Taxpayer does not serve youths within these areas, and it is not organized exclusively to promote programs and contests for youths, it does not qualify for this 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. 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.
Enclosed is a questionnaire for legislative consideration of a sales and use tax exemption request and Tax Bulletin 94-13, which explains the procedure and information required. If you are interested in pursuing exemption legislation during the 1996 Session of the General Assembly, the questionnaire should be completed and forwarded to the legislator who will sponsor the bill for exemption. The legislator must sign the questionnaire and submit it to the department by December 28, 1995.
If you have any questions regarding this matter, you may contact********************at**********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10625F
Rulings of the Tax Commissioner