Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations, private schools, and churches; Fund raising activities
Topic
Taxability of Persons and Transactions
Date Issued
12-20-1996
December 20, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear*****************
This is in reply to your letter in which you request a ruling on behalf of your client, the "Company," regarding the application of the sales and use tax to fundraising activities by employees of the Company. i apologize for the delay in responding to your letter.
FACTS
The Company operates retail stores in Virginia. The employees in the individual stores organize and conduct fundraising activities that involve retail sales separate from the sales activity of the Company. The Company itself does not sponsor the fundraising activities, but supports the efforts of the employees and in some instances makes purchases for the employees on a reimbursement basis. The fundraising activities vary among the stores. The net proceeds are donated to charity. The Company questions the application of the sales tax to three categories of fundraising activities.
RULlNG
Application/Collection of the Tax
Bake sales. hot dog sales. cookbook sales
Code of Virginia §58.1-603 imposes the sales tax on "each item or article of tangible personal property when sold at retail...in this Commonwealth." When the employee organization makes sales of the above items, it is engaged in making retail sales subject to the sales tax. In making such sales, the employee organization qualifies as a dealer under Code of Virginia §58.1-612 and must register for the collection and remittance of the sales and use tax pursuant to Code of Virginia §58.1-613, provided the occasional sale exemption is not applicable (see discussion below).
Donation jars. dress casual stickers. paper balloons
In this instance, monetary donations are contributed by customers and the name of the customer is placed on a paper balloon and displayed in the store. Employees who make a contribution are allowed to dress casual and receive a dress casual sticker. The employee organization is not engaged in making retail sales and is not required to collect the sales tax.
The donation jars, paper balloons, and stickers are used and consumed by the employee organization in conducting the fundraising activity. These items are subject to the use tax under Code of Virginia §58.1-604, which imposes a tax upon the use or consumption of tangible personal property in Virginia. Since the Company is purchasing these items and providing them to the employee organization, it is exercising a use over the property and should pay the tax at the time of purchase.
Car washes and walk-a-thons
This is another instance in which the employee organization is not engaged in making retail sales, but instead purchases materials for its own use in conducting car washes and walk-a-thons. The employee organization is correct in paying the tax upon the purchase of such materials.
Golf tournaments
The employee organization sponsors a charity golf tournament and solicits an entrance fee from each participant. The entrance fee represents an opportunity to play in the tournament and is not subject to the sales tax.
The employee organization is charged a lump sum fee by the golf course for green fees, golf carts, food, and prizes. Golf packages are taxable when they involve the provision of tangible personal property. While green fees are not taxable in and of themselves because they represent service charges, green fees are subject to the tax when provided in connection with the taxable sale of tangible personal property. As such, the employee organization must pay the tax on the lump sum fee charged by the golf course. See P.D. 95-17 (212195).
Applicable Exemptions
Resale
Code of Virginia §58.1 -602 provides the resale exemption in the definition of retail sale" or"sale at retail." As a registered dealer, the employee organization may purchase exempt of the tax for resale the ingredients used in the baked goods, the hot dogs, buns, condiments, and the cookbooks. In order to purchase for resale, a completed Certificate of Exemption, Form ST-10 must be provided to the vendors.
If the Company will purchase the cookbooks, the proper procedure would be for the Company to purchase the cookbooks exempt of the tax for resale and then sell the cookbooks to the employee organization also exempt of the tax for resale.
Occasional Sale
Code of Virginia § 58.1 -609.10(2) sets forth the occasional sale exemption which is defined in Code of Virginia §58.1-602. Virginia Regulation (VR) 630-10-75 provides that "[t]he tax does not apply to an occasional sale provided the sale is not one of a series of sales...sufficient in number, scope and character to constitute an activity requiring the holding of a certificate of registration."
As further stated in the regulation, the occasional sale exemption applies to organizations which are engaged in sales on three or fewer occasions within a calendar year. When an employee organization at a store location engages in three or less fundraising sales within one year, the occasional sale exemption would apply. Because sales to the final consumer are not taxed, the employee organization is required to pay the tax to vendors on its purchases and may not make such purchases under the resale exemption.
Nonprofit Status
The exemptions from the retail sales and use tax for nonprofit organizations are provided in Code of Virginia 58.1-609.1 through 58.1-609.10. In addition to qualifying as a nonprofit entity for federal tax purposes, an organization must also meet the other criteria set out in the statutory language of the exemption. Operating as a nonprofit charitable entity in and of itself does not entitle the employee organization or the Company to an exemption from the sales and use tax regarding the fundraising activities.
In accordance with the discussion in this ruling, l have enclosed copies of registration applications and instructions. The employee organizations required to register for the collection of the tax may apply for seasonal registrations and file returns only for those months in which the fundraising sales are conducted. See VR 630-10-31. I am also enclosing the cited statutes, regulations, other references, and copies of Form ST-10. Should you have additional questions, you may contact********************at**************
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11064J
Re: Request for Ruling: Retail Sales and Use Tax
Dear*****************
This is in reply to your letter in which you request a ruling on behalf of your client, the "Company," regarding the application of the sales and use tax to fundraising activities by employees of the Company. i apologize for the delay in responding to your letter.
FACTS
The Company operates retail stores in Virginia. The employees in the individual stores organize and conduct fundraising activities that involve retail sales separate from the sales activity of the Company. The Company itself does not sponsor the fundraising activities, but supports the efforts of the employees and in some instances makes purchases for the employees on a reimbursement basis. The fundraising activities vary among the stores. The net proceeds are donated to charity. The Company questions the application of the sales tax to three categories of fundraising activities.
RULlNG
Application/Collection of the Tax
Bake sales. hot dog sales. cookbook sales
Code of Virginia §58.1-603 imposes the sales tax on "each item or article of tangible personal property when sold at retail...in this Commonwealth." When the employee organization makes sales of the above items, it is engaged in making retail sales subject to the sales tax. In making such sales, the employee organization qualifies as a dealer under Code of Virginia §58.1-612 and must register for the collection and remittance of the sales and use tax pursuant to Code of Virginia §58.1-613, provided the occasional sale exemption is not applicable (see discussion below).
Donation jars. dress casual stickers. paper balloons
In this instance, monetary donations are contributed by customers and the name of the customer is placed on a paper balloon and displayed in the store. Employees who make a contribution are allowed to dress casual and receive a dress casual sticker. The employee organization is not engaged in making retail sales and is not required to collect the sales tax.
The donation jars, paper balloons, and stickers are used and consumed by the employee organization in conducting the fundraising activity. These items are subject to the use tax under Code of Virginia §58.1-604, which imposes a tax upon the use or consumption of tangible personal property in Virginia. Since the Company is purchasing these items and providing them to the employee organization, it is exercising a use over the property and should pay the tax at the time of purchase.
Car washes and walk-a-thons
This is another instance in which the employee organization is not engaged in making retail sales, but instead purchases materials for its own use in conducting car washes and walk-a-thons. The employee organization is correct in paying the tax upon the purchase of such materials.
Golf tournaments
The employee organization sponsors a charity golf tournament and solicits an entrance fee from each participant. The entrance fee represents an opportunity to play in the tournament and is not subject to the sales tax.
The employee organization is charged a lump sum fee by the golf course for green fees, golf carts, food, and prizes. Golf packages are taxable when they involve the provision of tangible personal property. While green fees are not taxable in and of themselves because they represent service charges, green fees are subject to the tax when provided in connection with the taxable sale of tangible personal property. As such, the employee organization must pay the tax on the lump sum fee charged by the golf course. See P.D. 95-17 (212195).
Applicable Exemptions
Resale
Code of Virginia §58.1 -602 provides the resale exemption in the definition of retail sale" or"sale at retail." As a registered dealer, the employee organization may purchase exempt of the tax for resale the ingredients used in the baked goods, the hot dogs, buns, condiments, and the cookbooks. In order to purchase for resale, a completed Certificate of Exemption, Form ST-10 must be provided to the vendors.
If the Company will purchase the cookbooks, the proper procedure would be for the Company to purchase the cookbooks exempt of the tax for resale and then sell the cookbooks to the employee organization also exempt of the tax for resale.
Occasional Sale
Code of Virginia § 58.1 -609.10(2) sets forth the occasional sale exemption which is defined in Code of Virginia §58.1-602. Virginia Regulation (VR) 630-10-75 provides that "[t]he tax does not apply to an occasional sale provided the sale is not one of a series of sales...sufficient in number, scope and character to constitute an activity requiring the holding of a certificate of registration."
As further stated in the regulation, the occasional sale exemption applies to organizations which are engaged in sales on three or fewer occasions within a calendar year. When an employee organization at a store location engages in three or less fundraising sales within one year, the occasional sale exemption would apply. Because sales to the final consumer are not taxed, the employee organization is required to pay the tax to vendors on its purchases and may not make such purchases under the resale exemption.
Nonprofit Status
The exemptions from the retail sales and use tax for nonprofit organizations are provided in Code of Virginia 58.1-609.1 through 58.1-609.10. In addition to qualifying as a nonprofit entity for federal tax purposes, an organization must also meet the other criteria set out in the statutory language of the exemption. Operating as a nonprofit charitable entity in and of itself does not entitle the employee organization or the Company to an exemption from the sales and use tax regarding the fundraising activities.
In accordance with the discussion in this ruling, l have enclosed copies of registration applications and instructions. The employee organizations required to register for the collection of the tax may apply for seasonal registrations and file returns only for those months in which the fundraising sales are conducted. See VR 630-10-31. I am also enclosing the cited statutes, regulations, other references, and copies of Form ST-10. Should you have additional questions, you may contact********************at**************
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11064J
Rulings of the Tax Commissioner