Tax Type
Retail Sales and Use Tax
Description
Exemption for churches.
Topic
Exemptions
Date Issued
02-27-1997
February 27, 1997
Re: Request for Ruling: Retail Sales and Use Tax
Dear*************
This is in reply to your letter of December 27, 1996, in which you request a ruling regarding the retail sales and use tax exemption for churches.
In your letter, you ask if a church must be specifically recognized by the Internal Revenue Service as exempt under § 501(c)(3) of the Internal Revenue Code to qualify for the sales tax exemption for churches provided under Code of Virginia § 58.1--609.8(2), or if a church is exempt from the sales and use tax because it is exempt by definition under § 501(c)(3) of the Internal Revenue Code.
Virginia Regulation (VR) 630-10-22.1 states that to qualify for the exemption, a church must have received a determination that it is either: (1) exempt from taxation under § 501(c)(3) of the Internal Revenue Code, or (2) exempt from local real property taxation under § 58.1-3606. Therefore, a church must be specifically recognized by the Internal Revenue Service as exempt in order to qualify for the retail sales and use tax exemption for churches.
As you may know, the 1997 General Assembly passed House Bill 1562, relating to tax exempt organizations. Under this bill, a nonprofit organization must receive notice of exempt status in writing from the Internal Revenue Service in order to qualify for any tax exemption under Title 58.1 of the Code of Virginia for "tax exempt organizations." The requirements in this bill are consistent with those currently established under VR 630-10-22.1.
A church which meets the exemption criteria may present a certificate of exemption, Form ST-13A (copy enclosed), to its vendors to make purchases exempt of the sales and use tax. As long as the purchases are covered by the exact wording of the exemption certificate and the vendor and the church exercise reasonable care and judgment in the use of the exemption certificate, the vendor is not required to collect the tax on the sale.
I would note that the legal incidence of the sales and use tax is on the purchaser. Consequently, if a church presents a certificate of exemption and it is subsequently discovered that the church does not qualify for the exemption under Code of Virginia § 58.1-609.8(2), the church will be liable for the tax.
I hope this response addresses your concerns. If you have any questions regarding this matter, you may contact ********of the department's Office of Tax Policy at**********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12013F
Rulings of the Tax Commissioner