Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations
Topic
Exemptions
Date Issued
02-28-1997
February 28, 1997
Re: Request for Ruling: Retail Sales & Use Tax
Dear*****************
This is in reply to your letter of February 7, 1997, in which you inquire about the application of the Virginia Retail Sales and Use Tax to purchases by ********** (the "Foundation").
FACTS
The Foundation has contracted with a Virginia printer for the printing of publications given to the State of Virginia, and to school systems throughout Virginia without charge. The Taxpayer's publications offer a variety of information relating to the heritage of ethnic segments of Virginia's population, as well as travel in and around Virginia. The Taxpayer's printer was audited and held taxable for sales of printing to the Taxpayer relating to the publications at issue. In an effort to recover its printing costs the printer has assessed the Foundation for the printing of the publications. The Foundation requests a response from the department stating that such printing charges are not taxable, and that it is not liable for payment of the tax to the printer.
RULING
There are no general exemptions from the Virginia Sales and Use Tax for nonprofit organizations. The only exemptions are those set out in Code of Virginia §§ 58.1-609.1 through 58.1-609.10.
The Foundation states that based on discussions with the department's district office, it considered itself in compliance with the requirements of Code of Virginia § 58.1-609.8(5). This particular exemption is for the withdrawal of inventory to be donated to an organization exempt from (income) taxation under Internal Revenue Code (IRC) § 501 (c)(3), or to the Commonwealth, any political subdivision of the Commonwealth, or any school, agency, or instrumentality thereof.
The intent of the exemption is to allow profit oriented businesses the ability to withdraw tangible personal property from resale inventory for donation to a nonprofit organization, government entity, school or other enumerated donee, without the application of the sales or use tax to the donated property. As the Foundation does not possess resale inventory, the exemption is not available.
The Foundation further believes that its material which is printed by the vendor is not taxable because of certain exemptions under Code of Virginia § 58.1-609.9(4) and (6). These exemptions, respectively, allow for the exclusion of tax on purchases of tangible personal property by § 501 (c)(3) organizations, when such organizations are organized either exclusively, or are nonprofit museums, for the specific purposes listed in the exemptions.
In response, the Foundation is not organized exclusively to meet the needs of American Indians, nor is the Foundation a museum operating for the purpose of commemorating and preserving the culture and history of the black people of Virginia. Since enactment, these exemptions have been strictly construed. To qualify for these exemptions, any organization must meet all of the criteria established in the exemption. Based on the information before me, the Foundation does not qualify for these exemptions.
A review of the remaining statutes indicates that there are currently no other exemptions which would be available for organizations such as the Foundation. Additionally, the Virginia courts have mandated that all sales and use tax exemptions are to be strictly construed, i.e., where there is a doubt as to the applicability of the exemption, the exemption must be denied.
While I am mindful of the worthwhile purpose the Foundation serves, absent such a statutory exemption that would allow the Foundation to purchase such property exempt of the tax, the department has no authority to grant an exemption. Accordingly, the Foundation is required to pay the tax on its purchases of tangible personal property. If the Foundation's vendors do not collect the tax, the Foundation is responsible to accrue and remit the tax on a Consumer Use Tax Return, Form ST-7.
If you should have any additional questions regarding this matter, please contact *********of the department's Office of Tax Policy at**********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12167Q
Rulings of the Tax Commissioner