Document Number
95-82
Tax Type
Retail Sales and Use Tax
Description
Government transactions; Nonprofit organization
Topic
Taxability of Persons and Transactions
Date Issued
04-17-1995
April 17, 1995



Re: Request for Ruling: Retail Sales and Use Tax


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

This will reply to your letter of March 8, 1995 in which you request a ruling on the application of the sales and use tax to purchases made by *************(the "Taxpayer").
FACTS

The Taxpayer is a nonprofit organization exempt from federal income taxation under § 501 (a)(3) of the Internal Revenue Code. The Taxpayer owns property used exclusively by *********** a local government agency.

All of the Taxpayer's income is derived from rental of property to the local government agency. The property is used by the agency in its operations providing mental health, mental retardation and substance abuse services to a three county area. The local agency is funded by a state agency providing similar services.
RULING

There is no general exemption from the Virginia retail sales and use tax for nonprofit organizations. The only exemptions from the tax are set out in Code of Virginia §58.1 -609.1 through 58.1 -609.13. The Virginia courts have consistently required strict construction of these exemptions, i.e., where there is any doubt as to the application of an exemption, the doubt is resolved against the one claiming the exemption. See Golden Skillet Corporation v. Commonwealth, 214 Va. 276, 199 S.E.2d 511 (1973).

Code of Virginia §58.1 -609.1 (4) provides an exemption for purchases of tangible personal property by the Commonwealth of Virginia and its political subdivisions. In this case, the Taxpayer is not a political subdivision of the Commonwealth, but rather an independent corporation organized exclusively to own property used by the local government agency. Therefore, the exemption is inapplicable under the doctrine of strict construction.

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.

Please note that the payments made by the local government agency to the Taxpayer for rental of tangible personal property are not subject to the tax, provided the payments are made pursuant to official purchase orders and paid for out of public funds.

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 General Assembly Session, 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 November 1, 1995.

If you have any questions regarding this matter, you may contact***************.
                        • Sincerely,



                          Danny M. Payne
                          Tax Commissioner


OTP/9463F

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46