Tax Type
Retail Sales and Use Tax
Description
Government transactions; Purchases on behalf of government
Topic
Taxability of Persons and Transactions
Date Issued
03-16-1995
March 16, 1995
Re: Request for Ruling: Sales and Use Tax
Dear****************
This will reply to your letter of February 20, 1995 in which you request a ruling as to the sales and use tax exemption status of *********************(the "Taxpayer").
FACTS
- The Taxpayer is a nonprofit organization exempt from income taxation under § 501(C)(3) of the Internal Revenue Code. The Taxpayer is organized for the following purposes:
- Expand knowledge pertaining to scientific and technological research and development among public and private entities including knowledge in the area of biotechnology;
- Promote the economical and industrial development of the******** and the*********and
- Conduct any lawful affairs, not required to be specifically stated in its Articles, for which corporations may be incorporated under the Virginia Nonstock Corporation.
The Taxpayer has a service agreement with the****************(the "Authority"), a political subdivision of the Commonwealth of Virginia. The Authority was created by the **********to implement certain of the public functions necessary for the development and operation of the **********. The agreement between the Authority and the Taxpayer provides that the Taxpayer will perform all services required for the development, construction, operation, leasing, financing, maintenance and management of the**************. The Authority will pay to the Taxpayer all of the Taxpayer's expenses in fulfilling the terms of the contract.
RULING
There is no general exemption from the Virginia Retail Sales and Use Tax for nonprofit organizations. The only exemptions are those set out in Code of Virginia §§58.1 -609.1 through 58.1 -609.13.
Code of Virginia §58.1-609.1(4) provides a sales and use tax exemption for, "tangible personal property for use or consumption by the Commonwealth, any political subdivision of the Commonwealth, or the United States". Virginia Regulation (VR) 63010-45.D.1 (copy enclosed) interprets the above statute with respect to the sales and use tax application to purchases by the Commonwealth and its political subdivisions and states, in part, the following:
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- The tax does not apply to sales to the Commonwealth of Virginia or to its political subdivisions, if the purchases are pursuant to required official purchase orders to be paid for out of public funds. The tax applies when such sales are made without the required purchase orders and are not paid for out of public funds. (Emphasis added).
Based on the information provided in your letter, the Taxpayer is not a political subdivision of the Commonwealth. The Taxpayer is merely under contract to perform all the services and duties required of the Authority. As provided under VR 630-1045.D.1, if purchases necessary in fulfilling the terms of the contract are made pursuant to an official purchase order of the Authority and paid for out of public funds, such purchases will enjoy the sales and use tax exemption. However, if purchases are made by the Taxpayer and the Authority is merely reimbursing the Taxpayer for expenses, all purchases will be subject to the tax.
VR 630-10-45.E further provides the tax application for government contractors and states that persons who contract with government entities or political subdivisions to perform services and in conjunction therewith furnish tangible personal property, are deemed to be the consumers of such property and are not entitled to exemption based on the fact that a political subdivision is a party to the contract. This same principle applies to contracts involving real property construction or repair.
If you should have any further questions, please feel free to contact the department.
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- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
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OTP/9377K
Rulings of the Tax Commissioner