Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizationsf tangible personal property
Topic
Taxability of Persons and Transactions
Date Issued
06-18-1997
June 18, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear***************
This will reply to your letter in which you seek correction of a sales and use tax assessment issued to*********** (the Taxpayer) for the period January 1994 through October 1996.
FACTS
The Taxpayer operates a summer camp for boys and girls, with complete living facilities including swimming pool, tennis courts, horse stables, etc. The camp provides programs to promote personal growth and learning through activities such as gymnastics, horseback riding, ropes course, swimming, etc. During the spring and fall months the camp remains open and offers two or three day programs to school, church, and other youth groups. The programs provide participants meals, accommodations, and outdoor activities such as horseback riding, leadership and environmental educational programs. Occasionally, the Taxpayer will provide only meals and lodging for group participants.
As a result of the department's audit, an assessment was made for certain untaxed sales and purchases. At issue is untaxed sales of meals and lodging in connection with the Taxpayer's spring and fall activities. The Taxpayer points out that summer camps provide a service and are exempted from collecting the sales tax on meals and accommodations. The Taxpayer maintains that the programs held during the spring and fall months provide learning and educational services similar to its summer camp program. The Taxpayer further maintains that the only difference in the programs held during the spring and fall months is that the participants are usually accompanied by their teachers and group leaders, and the number of participants and staff are considerably smaller than the summer program. Therefore, the Taxpayer feels that charges for meals and accommodations provided in connection with activities represent nontaxable services.
The Taxpayer's second contention is that the programs provided during the spring and fall months provide educational classes but the Taxpayer does not have the same consideration as schools which are granted the educational exemption.
DETERMINATION
Code of Virginia § 58.1-609.5(1) provides an exemption from the sales and use tax for "[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made...."
Title 23 of the Virginia Administrative Code (VAC) 10-210-4040, which interprets the above statutory provision explains that for purposes of distinguishing whether a particular transaction constitutes an exempt service or a taxable retail sale, the "true object" of the transaction must be examined. If the object of the transaction is to secure a service and the tangible property which is transferred is not critical to the transaction, then the transaction may constitute an exempt service. If the object of the transaction is to secure the property it produces, then the entire charge is taxable.
The object of the transaction for summer camp fees represents charges for nontaxable services. As provided in Title 23 VAC10-210-5020, "[o]perators of summer camps, whether operated for profit or not, are consumers of all tangible personal property used in their operations. Their purchases are subject to the tax. Fees charged for attendance are not taxable...."
Based on the information provided, the object of the transaction involving charges for Spring and Fall programs that provide activities and educational programs is for the sale of recreational, instructional or other exempt services. In such instances, the meals and accommodations are inconsequential to the transaction and are exempt from the sales tax. As a provider of this service, the Taxpayer is the consumer of all tangible personal property used in providing its service and must pay the tax on its purchases. Accordingly, the transactions involving the sale of meals and accommodations in connection with the provision of activities or educational programs will be removed from the audit assessment.
However, the Taxpayer's charges for accommodations, without the provision of activities or educational programs, is subject to the tax in accordance with Title 23 VAC 10-210-730 of the regulation which provides that "[t]he tax applies to the sale or charge for any room or rooms, lodgings or accommodations furnished to transients by any hotel, motel, inn, tourist camp, tourist cabin, camping grounds, club, or other similar place." The retail sale of meals in connection with such accommodations is taxable as provided in Title 23 VAC 10-210-930. Accordingly, charges for meals and accommodations, apart from the provision of activities or educational programs, are subject to the tax and were properly held taxable. I have enclosed Public Document's 90-23 (3/5/90) and 87-69 (3/27/87) for your information.
In addressing the educational exemption, Code of Virginia § 58.1-609.4(2) provides an exemption for sales of tangible personal property to nonprofit schools, colleges or other institution of learning for their own use or consumption and paid for out of their funds. In this case, the Taxpayer is not a nonprofit school, college or other institution of learning, but rather an organization conducted for profit that provides educational programs in connection with its spring and fall program. Therefore, the exemption is inapplicable. Further, even if the Taxpayer qualifies as a school or other institution of learning, Title 23 VAC 10-2104020.8(B) provides that the tax applies to sales of tangible personal property to schools, colleges, and other institution of learning when they are conducted for profit.
The audit will be revised in accordance with the determination herein and a refund based on this revised audit report will be issued shortly. If you have any questions concerning this letter, you may contact **************** in the Office of Tax Policy at ************* .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12301T
Rulings of the Tax Commissioner