96-25 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Nonprofit organizations, private schools, and churches; Schools

Topic

Taxability of Persons and Transactions

Date Issued

03-29-1996

March 29, 1996

Re: Request for Ruling: Retail Sales and Use Tax

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

This will reply to your letter of November 30, 1995 requesting a ruling on the application of the retail sales and use tax to sales made by nonprofit elementary and secondary educational institutions.

FACTS

You indicate that these nonprofit schools are exempt from income taxation under 501(c)(3) of the Internal Revenue Code and are operated on a day or boarding basis. You specifically ask whether the sales tax would apply to sales of a la carte school lunches, tangible personal property sold from a bookstore located on the school's premises, and school supplies and other items (sweatshirts, jackets, book bags, etc.) sold by such schools. All proceeds received from these sales are utilized in each school's operations.

RULING

Code of Virginia § 58.1-609.4(8) provides an exemption from the retail sales and use tax for:

Tangible personal property purchased for use, consumption, or sale at retail by an elementary or secondary school conducted not for profit, . . . for use in fund-raising activities, the net proceeds (gross receipts less direct expenses) of which are contributed directly to the school or used to purchase certified school equipment .... (Emphasis added.)

In the enclosed Public Document 89-290 (10/27/89), the department determined that the exemption can extend to a nonprofit school which conducts its own fund-raising activities. In that case, sales of various items were made by an internal school store to students and faculty of the school. All proceeds from those sales were distributed directly to the school for use in carrying on the operations of the school. Therefore, it is clear that if a nonprofit school is making the sale and the net proceeds are retained by the school, the exemption applies.

As the nonprofit elementary and secondary schools in this case will retain and use all net proceeds from sales of school lunches and tangible personal property by such schools, all such sales by these schools will qualify for the above referenced exemption. Therefore, these nonprofit elementary and secondary schools will not be required to register for the collection and remittance of the sales tax on its sales, provided the profits realized from sales are continuously retained by the schools for use in their operations.

If you have any questions about this ruling, please contact*****at *****.

Sincerely,

Danny M. Payne
Tax Commissioner

OTP/10674R

Rulings of the Tax Commissioner