Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations, private schools, and churches; Community center denied exemption
Topic
Taxability of Persons and Transactions
Date Issued
06-30-1997
June 30, 1997
Re: Request for Ruling: Retail Sales and Use Tax
Dear*********************
In your letter of May 13, 1997, you request a ruling whether ********* (the Taxpayer) qualifies for an exemption from the retail sales and use tax on purchases of tangible personal property for its use or consumption in maintaining the inside of the *****building (the Center) or in carrying out its activities.
FACTS
The Taxpayer is a nonstock, nonprofit volunteer organization exempt from income taxation under § 501 (c) (3) of the Internal Revenue Code. The Taxpayer is organized exclusively for charitable purposes to supervise the development and operation of the Center in cooperation with the County of******* , Virginia for the use and benefit of the citizens of the community, to promote wholesome recreation for members of the community, and to help build good character, citizenship and friendship in the community.
The Taxpayer maintains the inside of the Center and schedules the organizations and individuals who want to use the Center. Any organization or individual may use the Center for meetings, weddings, birthday parties, anniversary parties, dinners, aerobic classes, exercise classes, dance classes, crafts classes and other recreational activities. A user fee of $10.00 per hour is charged, except community organizations are allowed to use the Center free of cost. The County of *** owns the Center and maintains the outside of the building.
The Taxpayer maintains that it is eligible for the exemptions set out under Code of Virginia §§ 58.1-609.1(4) and 58.1-609.8(11).
DETERMINATION
As set out in Title 23 of the Virginia Administrative Code (VAC) 10-210-1070, there is no general exemption from the retail sales and use tax for nonprofit organizations. The only exemptions from the tax are set in Code of Virginia §§ 58.1 -609.1 through 58.1-609.10. The Virginia courts have consistently required strict construction of these exemptions; i.e., where there is any doubt as to the application of the exemption, the court has resolved against the party claiming the exemption. Accordingly, a nonprofit organization must meet all of the criteria specified in the statutory provisions of the exemption in order to qualify for the exemption.
Code of Virginia § 58.1-609.1 (4) provides an exemption from the retail sales and use tax for tangible personal property purchased for use or consumption by any political subdivision of the Commonwealth. In addition, purchases made on behalf of a political subdivision of Virginia are exempt from the tax only if the purchaser is actually designated an agent for the locality and the purchase is paid for directly with public funds.
Although the Taxpayer maintains and supervises the inside of a county-owned building, the Taxpayer is not a political subdivision of the Commonwealth. Furthermore, the Taxpayer has not shown that it has been designated an agent of the County of********* able to bind the credit of such locality to the Taxpayer's purchases. For these reasons, the Taxpayer does not meet the criteria of the exemption and therefore may not use the governmental exemption to purchase goods exempt of the tax.
Code of Virginia § 58.1-609.8(11) provides an exemption from the retail sales and use tax for:
-
- ...tangible 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. (Emphasis added.)
In order to qualify for the exemption, an organization must be: (1) organized not-for-profit, (2) exempt from taxation under l.R.C. § 501 (c) (3), (3) exempt from local real estate taxation, and (4) organized for the stated purpose. Although the Taxpayer satisfies the first two criteria, it fails to the meet the local real estate taxation and organizational requirements of 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. Furthermore, the Taxpayer is not organized exclusively for the purposes stated in the exemption. Thus, the Taxpayer does not qualify for the exemption.
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 the 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. The information provided indicates that the Taxpayer is not organized exclusively for the purposes stated in the exemption. Thus, the exemption is not available to the Taxpayer.
Although I am mindful of the worthwhile purpose that the Taxpayer serves, absent any statutory exemption that would allow the Taxpayer to make purchases exempt of the tax, the department has no authority to grant such an exemption. As a result, the Taxpayer is required to pay the sales tax charged by its vendors on purchases of tangible personal property, meals and lodging.
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/12599R
Rulings of the Tax Commissioner