Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations, organization not exempt
Topic
Taxability of Persons and Transactions
Date Issued
04-29-1997
April 29, 1997
Re: Request for Ruling: Retail Sales and Use Tax
Dear*************
This is in reply to your letter of April 10, 1997, in which you request a ruling regarding the availability of a retail sales and use tax exemption for the ********* (the "Taxpayer").
FACTS
The Taxpayer is a nonprofit charitable organization exempt from federal income taxation under § 501(c)(3) of the Internal Revenue Code. The main goal of the organization is to build girls and boys, physically, mentally, and morally through physical education, athletic programs, and contests for youths. The Taxpayer is also dedicated to providing team members with academic assistance through tutoring and maundering.
You request a ruling that the Taxpayer is not subject to the retail sales and use exemption provided in Code of Virginia § 58.1-609.8(11).
RULING
Code of Virginia § 58.1-609.8(11 ) exempts from the retail sales and use tax:
-
- [T]angible personal property purchased for use or consumption by or sold by a nonstock, nonprofit charitable organization, exempt from taxation under § 501 (c)(3) of the Internal Revenue Code and from local real estate taxation, which is organized exclusively to foster, sponsor and promote physical education, athletic programs and contests for youths in the Commonwealth.
Based on the strict construction in interpreting sales and use tax exemptions, as consistently required by the Virginia courts, not all nonprofit organizations providing physical education and athletic programs for youth qualify for the above exemption. In order to qualify for the exemption, an organization must be: (1) organized not-for-profit, (2) exempt from taxation under Internal Revenue Code (I.R.C.) § 501 (c)(3), (3) exempt from local real estate taxation, and (4) organized exclusively for the stated purpose.
In this case, the Taxpayer fails to meet the local real estate taxation requirement contained in the exemption. An exemption from local real estate taxation requires an act of the General Assembly; it is not sufficient that the organization is not subject to real estate taxation because it does not own any real property. Thus, the Taxpayer does not qualify for the exemption.
Furthermore, the Taxpayer does not qualify for the exemption provided in Code of Virginia § 58.1-609.8(35). That exemption is available to organizations exempt from taxation under l.R.C. § 501 (c)(3) and organized exclusively to foster, sponsor and promote sportsmanship, recreation and health through athletic programs and contests for youths within the boundaries of the Fifteenth Planning District established pursuant to Code of Virginia § 15.1-1403. The Fifteenth Planning District includes the counties of Charles City, Chesterfield, Goochland, Hanover, Henrico, New Kent, Powhatan and the City of Richmond. A review of the information provided indicates the Taxpayer is not organized exclusively for the purposes stated in the exemption. Thus, the exemption is not available to the Taxpayer.
While I am mindful of the worthwhile purpose the Taxpayer serves, absent a statutory exemption that would allow the Taxpayer to make purchases exempt of the tax, the department has no authority to grant such an exemption. Therefore, the Taxpayer is required to pay the tax to its vendors on all purchases of tangible personal property. If a vendor is not registered to collect the tax, the Taxpayer must report and pay use tax on a Consumer's Use Tax Return, Form ST-7.
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
Rulings of the Tax Commissioner