Tax Type
Retail Sales and Use Tax
Description
Interstate transactions; School equipment purchased from out-of-state manufacturer
Topic
Taxability of Persons and Transactions
Date Issued
04-11-1996
April 11, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear**********
This will reply to your request for a ruling regarding the application of the sales and use tax to purchases for donation to schools by ***** (the "Taxpayer"). I apologize for the delay in responding to your request.
FACTS
The Taxpayer, a grocery retailer with stores located in Virginia, is a participant in a program in which local schools collect grocery receipts and redeem the value of the receipts for purchases of school equipment and supplies. The receipts are submitted by the schools, along with the order for the equipment and supplies, to an out-of-state vendor. The vendor places the order equal in value to the receipts with an out-of-state manufacturer and instructs the manufacturer to ship the merchandise directly to the schools in Virginia. The vendor invoices the Taxpayer for the cost of the merchandise shipped to the schools. The Taxpayer questions whether it is required to pay tax on these purchases or if the purchases qualify as sales in interstate commerce.
RULING
Virginia Regulation (VR) 630-10-51 provides that the tax does not apply to "sales of tangible personal property in interstate or foreign commerce." The regulation also provides that "[a] sale in interstate or foreign commerce occurs only when title or possession to the property being sold passes to the purchaser outside of Virginia and no use of the property is made in Virginia." In this case, title and possession pass upon delivery to the schools and the merchandise is used in Virginia. The purchases fail both tests required by the regulation and therefore, the transactions do not qualify for exemption as sales occurring in interstate commerce.
The purchases in question, however, qualify for exemption under Code of Virginia § 58.1-609.4(8) (copy enclosed), which grants a retail sales and use tax exemption specifically for certified school equipment contributed directly to schools by groups associated with the nonprofit elementary or secondary schools. Since the Taxpayer has an association with the schools through its annual receipts program and purchases equipment and supplies exclusively for donation to such schools, the above statute is applicable in this instance. Purchases by the Taxpayer for any purpose other than the issue discussed in this letter or for resale as general stock in its grocery stores will be subject to the tax unless exempt under some other statute.
Future purchases of school equipment and supplies for donation exclusively to schools in Virginia may be purchased exempt of the tax under authorization of this letter. If you have additional questions, please do not hesitate to contact ***** in the Office of Tax Policy at*********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8599J
Rulings of the Tax Commissioner