Tax Type
Retail Sales and Use Tax
Description
Occasional sales; Youth athletic organization
Topic
Taxability of Persons and Transactions
Date Issued
11-01-1996
November 1, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear**********
This will reply to your letter of October 18, 1996, in which you request a ruling on the application of the sales and use tax to the ********(the "Taxpayer").
FACTS
The Taxpayer is a nonprofit association which has applied for an exemption from federal income taxation under Internal Revenue Code (I.R.C.) § 501(c)(3). The Taxpayer is established to: (1) provide an organized amateur hockey program for young people throughout the area; (2) promote the development of hockey as a participation and spectator sport; (3) assist parents in the character development of member players by instilling the ideals of citizenship, sportsmanship, fair play and team work through competitive sports; (4) foster the development of hockey skills; and (5) establish mutually beneficial relationships with similar organizations.
RULING
Exemptions for youth athletic programs
Code of Virginia § 58.1-609.8(11) provides an exemption from the retail sales and use tax for:
-
- [t]angible personal property purchased for use or consumption by or sold by a nonstock, nonprofit charitable organization, exempt from taxation under § 501(c)(3) of the Internal Revenue Code and from local real estate taxation, which is organized exclusively to foster, sponsor and promote physical education, athletic programs and contests for youths in the Commonwealth.
Based on the strict construction in interpreting sales and use tax exemptions, as consistently required by the Virginia courts, not all nonprofit organizations providing physical education and athletic programs for youth qualify for the above exemption. In order to qualify for the exemption, an organization must be (1) organized not-for-profit, (2) exempt from taxation under I.R.C. § 501(c)(3), (3) exempt from local real estate taxation, and (4) organized exclusively for the stated purpose.
In this case, the Taxpayer fails to meet the local real estate taxation requirement contained in the exemption. An exemption from local real estate taxation requires an act of the General Assembly; it is not sufficient that the organization is not subject to real estate taxation because it does not own any real property. Thus, the Taxpayer does not qualify for the exemption.
Furthermore, the Taxpayer does not qualify for the exemption provided in Code of Virginia § 58.1-609.8(35). That exemption is available to organizations exempt from taxation under I.R.C. § 501(c)(3) and organized exclusively to foster, sponsor and promote sportsmanship, recreation and health through athletic programs and contests for youths within the boundaries of the Fifteenth Planning District established pursuant to Code of Virginia § 15.1-1403. The Fifteenth Planning District includes the counties of Charles City, Chesterfield, Goochland, Hanover, Henrico, New Kent, Powhatan and the City of Richmond. A review of the Articles of Incorporation indicates the Taxpayer is not organized exclusively for the purposes stated in the exemption. Thus, the exemption is not available to the Taxpayer.
Occasional sale exemption
It is my understanding that the Taxpayer is seeking an exemption from collecting the tax on its fund raising sales. Code of Virginia § 58.1-609.10(2) provides an exemption for an occasional sale as defined in § 58.1-602. The definition of occasional sale includes the sale by an organization which engages in sales on three or fewer separate occasions within one calendar year.
In this case, if the Taxpayer engages in three or fewer sales during the calendar year, it will not be required to register and collect the tax. Because the Taxpayer is not required to collect the tax from the consumer (i.e., the sale of property will not be taxed), the Taxpayer will be required to pay the tax to vendors on its purchases.
Please note that if the sale is large in scope (i.e., for an extended duration), or is one of a series of several sales, the exemption will not apply and the Taxpayer will be required to register and collect the tax on its sales. Enclosed are Public Documents (P.D.) 89-173 (5/24/89) and 90-39 (3/19/90), which provide guidance concerning when the department will require an organization to register and collect the tax based on the nature of their sales.
Legislative consideration of a sales and use tax exemption
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 the Taxpayer is interested in pursuing exemption legislation during the 1997 Session of the General Assembly, 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 29, 1996.
If you have any questions regarding this ruling. You may contact ***** in the department's Office of Tax Policy at ********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11738F
Rulings of the Tax Commissioner