Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations, private schools and churches; Availability of sales and use tax exemption for nonprofit organization
Topic
Taxability of Persons and Transactions
Date Issued
11-27-1996
November 27, 1996
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear
This is in reply to your letter in which you seek correction of a retail sales and use tax assessment issued to ********** ('the "Taxpayer") for the period August 1993 through July 1996.
FACTS
The Taxpayer is a nonprofit organization exempt from federal income taxation under 501 (c)(3) of the Internal Revenue Code. The Taxpayer is organized to improve the quality and efficiency of remediation and training activities by encouraging more widespread utilization of individualized, self-paced instructional materials in conjunction with computer-assisted and computer-managed instructional systems. The Taxpayer designs and develops courses and instructional management systems to assist in the instruction of the educationally disadvantaged .
During the audit period, the Taxpayer purchased computers and equipment which were used in its education and training activities. The Taxpayer purchased components, added materials and systems to integrate the pieces into a fully functioning learning center, installed the equipment, and trained staff. The auditor assessed tax on the untaxed purchases of the computers and equipment.
The Taxpayer maintains the purchases are not subject to sales and use tax because it is a nonprofit organization which develops courses and programs on behalf of nonprofit schools and training agents.
DETERMINATION
Nonprofit exemption
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. Based on the information provided, there is no exemption in 58.1 -609.1 through 58.1 -609.13 that would apply to the Taxpayer.
Assessment of tax on Purchases
Through its activities, the Taxpayer: develops education and training courseware; applies technologies for instruction and management; disseminates low cost tools for education and training; designs, evaluates and replicates model programs; and conducts labor market and education research. Based on this information, the Taxpayer is engaged in the provision of services and is the taxable user and consumer of all items purchased in connection with rendering its services. This is true despite the fact that the purchases were made with funds acquired through grants from various private foundations. Based on the information before me, I find that the auditor properly included the purchases of computers and equipment in the audit.
I would note that the audit report shows estimated purchases for certain months. If the Taxpayer can produce documentation showing actual purchases for those months, the department will review the information and adjust the audit as warranted.
Please submit the requested purchase documentation to the department's **************** District Office, **************Virginia*******within 30 days. If additional information is not received within the allotted time, the assessment will be deemed correct as issued and collection action will resume.
If you have any questions concerning the documentation to be provided you may contact******* in the ********District Office at****************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11754F
Rulings of the Tax Commissioner