Tax Type
Retail Sales and Use Tax
Description
Manufacturing, processing, assembling, or refining; Research and development
Topic
Taxability of Persons and Transactions
Date Issued
05-08-1996
May 8, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear*******
This is in reply to your letters of January 31, 1996 and April 10, 1996, in which you request a ruling on the application of the retail sales and use tax to***** (the "Taxpayer").
FACTS
The Taxpayer is a nonstock, charitable, scientific and educational organization exempt from federal income taxation under § 501(c)(3) of the Internal Revenue Code. It operates in close proximity to or in conjunction with research facilities of two out-of--state universities. The Taxpayer conducts research in the physical, biological, medical, mathematical, agricultural, economic, and engineering sciences and publishes information and data arising from its investigations and research.
You request confirmation that the Taxpayer is exempt from payment of Virginia sales and use taxes.
RULING
Code of Virginia § 58.1-609.3(5) provides an exemption for tangible personal property purchased for use or consumption directly and exclusively in basic research or research and development in the experimental or laboratory sense. Research activities that qualify for this exemption include any activity which has as its goal the advancement of existing knowledge or technology; the development of new uses for existing products, technology or processes; or the improvement of existing products, technology or processes.
The department's policy regarding this exemption is set out in Virginia Regulation (VR) 630-10-92. This document defines "basic research" as:
-
- A systematic study or search in a scientific or technical field of endeavor with the ultimate goal of advancing knowledge or technology in that field. Basic research in the experimental or laboratory sense is such research that is carried on in a laboratory environment or by experimental methods.
Based on the information provided, the Taxpayer's activities encompass "basic research" as defined above, and qualify for the exemption set forth in Code of Virginia § 58.1-609.3(5).
The exemption is narrowly limited to items that are used directly and exclusively in the actual research process. Items used in secondary activities, such as administration, general maintenance, and product marketing, do not qualify for the exemption. Items that are used in both exempt and non-exempt activities in connection with the research are not used exclusively and, therefore, are subject to the tax. Furthermore, as noted in the regulation, the exemption is limited in its application and does not apply to all tangible personal property purchased by the Taxpayer.
I trust that this information is helpful. If you have any questions, you may contact ***** at*****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10897F
Rulings of the Tax Commissioner