Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations, private schools, and churches; Distribution of free goods during Christmas season
Topic
Taxability of Persons and Transactions
Date Issued
08-16-1996
August 16, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear********************
This is in response to your correspondence seeking an exemption from the retail sales and use tax for purchases made by ********** (the "Store").
FACTS
As an all-volunteer, charitable organization exempt from income taxation under § 501 (c) (3) of the Internal Revenue Code, the Store is organized exclusively to freely distribute, food, clothing, toys, and household items to low income families, elderly persons, and disabled individuals residing within a certain geographical region of Virginia during the Christmas season. The recipients are financially strapped needy families or persons who have incomes at or below 125% of the federal poverty income guidelines. The Store does not sell any of the merchandise which it distributes. All funding is from private donations and 90% of it is used to purchase new goods with the remainder paying for overhead costs. There are no paid employees.
RULING
Code of Virginia § 58.1-609.8(6) provides an exemption from the retail sales and use tax for:
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- Tangible personal property purchased by an organization which is exempt from taxation under § 501 (c) (3) of the Internal Revenue Code and which is organized primarily to distribute, during the Christmas season, food, toys, and clothing to persons in financial need, provided such tangible personal property is distributed at no cost to financial needy persons.
Based on the information presented, I find that the Store qualifies for the above exemption. Accordingly, the Store may purchase tangible personal property exempt from the tax by providing its vendors a copy of this letter. Furthermore, purchases must be paid for directly out of the Store's funds (e.g., either direct billing to the Store or using the Store's check or the Store's credit card).
It should be noted, however, that the exemption does not apply to the following transactions:
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- purchases by volunteers with personal funds and the Store reimburses the volunteer,
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- purchases made in cash since a cash transaction provides no traceable proof that the cash funds belong to the Store, and
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- purchases of taxable services, such as meals or lodgings.
I would also note that the above cited exemption is not contained on the form ST-13 exemption certificate. Accordingly, the Store cannot use such exemption certificate to exempt its purchases. Of additional importance, the Store is not required to obtain a retail sales and use tax registration number since it does not make any retail sales. Moreover, the department does not assign tax-exemption numbers.
If you have any questions concerning this matter, please contact ***********of my Office of Tax Policy at***************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10881R
Rulings of the Tax Commissioner