Tax Type
Retail Sales and Use Tax
Description
Gifts To Nonprofit Organizations
Topic
Taxability of Persons and Transactions
Date Issued
06-28-1996
June 28, 1996
Re: § 58.1-1821 Application: Retail Sales & Use Tax
Dear*************
This will reply to your letter in which you seek correction of a sales and use tax assessment issued to ******* (the "Taxpayer") for the period April 1991 through March 1994. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is a non-profit membership organization providing various services to its members. The Taxpayer states that it received a "gift-in-kind" computer from a corporate donor. The department's audit disclosed that the computer was listed on the Taxpayer's depreciation schedule. Since there was no documentation stating that the computer was a corporate gift, the auditor held taxable the amount listed on the Taxpayer's schedule.
The Taxpayer states that the computer was never placed in service, since the necessary software for use on the computer was never developed. The Taxpayer requests an abatement of the tax, penalty and interest related to the taxation of the computer.
DETERMINATION
Code of Virginia § 58.1-609.8.5 provides an exemption from the tax for "[t]angible personal property withdrawn from inventory and donated to (i) an organization exempt from taxation under § 501 (c)(3) of the Internal Revenue Code (I.R.C.)...." "Donation" is defined in The American Heritage Dictionary, Second College Edition, as "the act of giving to a fund or cause; contribute."
"Gift" is defined as "something that is bestowed voluntarily and without compensation." The Virginia courts have consistently held that exemptions from the tax must be strictly construed, and where there is any doubt, that doubt must be resolved against the person claiming the exemption.
In this case there is an absence of documentation establishing proof that the Taxpayer received the computer as a gift. Without such proof the auditor was justified in including the property in the audit's computations.
If the Taxpayer can produce documentary evidence to support its claim that the computer was received through a corporate donation in accordance with Code of Virginia § 58.1-609.8.5, I will allow an adjustment of the audit. Please return such documentation to the department within 60 days. If the information is not received within that time, the assessment will be presumed to be correct as assessed, and the balance inclusive of accrued interest will become due.
If you have any questions regarding this matter, or you desire to return the requested information, please contact ****of the department's Office of Tax Policy at*******
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9346Q
Rulings of the Tax Commissioner