Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations, private schools, and churches; Independent nonprofit hospital clinics
Topic
Taxability of Persons and Transactions
Date Issued
04-08-1997
April 8, 1997
Re: Request for Ruling: Retail Sales and Use Tax
Dear******************
This is in reply to your letter in which you request a ruling on the application of the sales and use tax to ************* (the "Taxpayer").
FACTS
The Taxpayer is a nonprofit hospital corporation composed of nine operating divisions - two nonprofit hospitals, a nonprofit nursing home, three medical centers (clinics), a laboratory, a residential psychiatric facility, and a corporate administrative division.
The Taxpayer questions the application of the tax to purchases made by the clinics. The Taxpayer maintains the clinics constitute an integral part of the health care mission of the nonprofit hospitals and therefore qualify for exemption under Title 23 VAC 10-210-720 (formerly Virginia Regulation 630-10-47). The clinics are physically off-site from the nonprofit hospital locations.
RULING
Code of Virginia § 58.1-609.7(4) provides an exemption from the retail sales and use tax for tangible personal property purchased for use and consumption by a nonprofit hospital or a nonprofit licensed nursing home. Title 23 VAC 10-210-720 discusses the application of the exemption and in subsection D provides that a clinic that is an integral part of a hospital conducted not for profit qualifies for the exemption.
According to the organizational chart detailing the corporate structure of the Taxpayer, the clinics function as operating divisions of the Taxpayer as the parent corporation. The clinics, therefore, are not operating units within the nonprofit hospitals, but instead operate independent of the nonprofit hospitals. Based on the information provided, the clinics do not function as an integral part of either nonprofit hospital, and the exemption does not apply.
This decision is based on the department's established policy regarding this issue and is consistent with the ruling in Public Document (P.D.) 92-220 (11/4/92). In that case, the Tax Commissioner determined that a nonprofit children's hospital outpatient clinic functioned as part of the exempt hospital because it did not operate, in terms of its corporate structure, separately from the nonprofit hospital. This was true despite the fact that the clinic was located at a different site. In the instant case, however, the clinics function as separate and distinct divisions of the Taxpayer, a nonprofit hospital corporation.
I hope the foregoing has responded to your inquiry. Enclosed are copies of the cited statute, regulation, and P.D. 92-220 for your review. If you have additional questions, please contact ************** in the *** District Office at ***.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11965J
Rulings of the Tax Commissioner