Tax Type
Retail Sales and Use Tax
Description
Manufacturing, processing, assembling, or refining; Research and development
Topic
Taxability of Persons and Transactions
Date Issued
12-10-1996
December 10, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear**************
This is in reply to your letter of September 27, 1996 in which you seek exemption from the retail sales and use tax for************* (the "Taxpayer").
FACTS
The Taxpayer IS a nonprofit foundation exempt from federal income taxation under § 501(a) of the Internal Revenue Code. The Taxpayer's purpose is to promote charitable giving by creating a database of information available to the philanthropic community regarding American charities. The Taxpayer seeks exemption from the Virginia retail sales and use tax.
RULING
There is no general exemption from the 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 -609.10 (copy enclosed). 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 a review of the information provided, the Taxpayer does not qualify for the research exemption provided under Code of Virginia §58.1-609.3(5) because the Taxpayer is not engaged in research and development activities in the experimental or laboratory sense. Instead, the Taxpayer collects, analyzes, and compiles operating and financial data filed with the Internal Revenue Service. These activities do not meet the criteria required for exemption under the statute.
Code of Virginia §58.1-609.6(3) provides an exemption from the sales tax for "[a]ny publication issued daily, or regularly at average intervals not exceeding three months....except that newsstand sales of the same are taxable." A publication is defined as "a newspaper, magazine or other periodical which is available for general distribution to the public." Jefferson Publishing Corporation v. W.H. Forst. State Tax Commissioner, 217 Va. 988, 234 S.E.2d 297 (1977). The Taxpayer's ********* products may qualify for the publication exemption if they are available for general distribution to the public, meet the interval test provided in the statute, and are purchased on a subscription basis. If that is the case, the Taxpayer would not be responsible for collecting the tax on sales of such products.
While I am mindful of the worthwhile purpose that the Taxpayer serves, absent a statutory exemption that would allow the Taxpayer to make purchases exempt of the tax, the department has no authority to grant an exemption in this case, notwithstanding the possible application of the publication exemption. The Taxpayer, therefore, should pay the tax on all purchases of tangible personal property used in the provision of its services and also register and collect the tax on any sales of publications that do not qualify for the exemption.
In the event that the Taxpayer makes taxable sales in Virginia, l am enclosing the Virginia Combined Registration Form R-1 and instructions. If you have questions concerning this matter, you may contact*************at*************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11842J
Rulings of the Tax Commissioner