Tax Type
Retail Sales and Use Tax
Description
Nonprofit organizations, Purchases
Topic
Taxability of Persons and Transactions
Date Issued
09-26-1997
September 26, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear*************
This is in response to your letter of July 29, 1997, regarding a sales and use tax assessment issued to********* (collectively, the "taxpayer") for the period May 1991 through April 1997.
FACTS
The Taxpayer is a nonprofit organization exempt from income taxation under Internal Revenue Code (IRC) § 501 (c)(3). The primary purposes of the Taxpayer are to further the economic development of the central business district of the (the "Locality") and to assist the growth and development of the Locality's business concerns.
In addition, the Taxpayer solicits donations through a variety of activities for worthy projects which benefit the Locality. At issue in this case is the use of such funds by the Taxpayer to purchase bicycles for the Locality's police bike patrol and playground equipment for one of the Locality's neighborhood parks. You question the tax assessment associated with the purchases of these items. You indicate that these items were ordered by the Locality, and the invoices were sent to the Taxpayer for payment. Accordingly, the bicycles and playground equipment were never in the Taxpayer's possession and are intended only for public use. You also maintain that the purchases represent a true measure of private sector partnership and fulfils the Taxpayer's mission of enhancing the quality of life in the community.
DETERMINATION
Based on its status as a nonprofit organization under IRC § 501 (c)(3), the Taxpayer is exempt from income taxation. There are no general exemptions, however, from the retail sales and use tax for nonprofit organizations. The only exemptions from the tax are set out in Code of Virginia §§ 58.1-609.1 through 58.1-609.10. Code of Virginia § 58.1-609.8 (copy enclosed) sets out the exemptions available to certain nonprofit civic and community service organizations.
I have reviewed the Taxpayer's Articles of Incorporation in light of the existing statutory exemptions. It does not appear that the Taxpayer is exempt from the tax on its purchases of tangible personal property. Lacking a specific statutory exemption that would allow the Taxpayer to make purchases exempt of the tax, the department has no authority to grant such an exemption. The Taxpayer is therefore required to pay the tax on all purchases of tangible personal property from vendors who are registered to collect the tax. If the Taxpayer makes purchases from vendors who are not registered to collect the Virginia sales tax, the Taxpayer must report and pay the tax on such purchases using a Consumer Use Tax Return.
I have also enclosed a number of prior determinations which address the application of the tax to purchases by nonprofit organizations. These determinations are especially instructive because in each one, as in the instant case, the organizations provided property and services to benefit state or local government. Nevertheless, purchases of tangible personal property by those organizations were found to be taxable.
Finally, the department will work with you should you decide to pursue a legislative exemption on this issue. Enclosed is a questionnaire for legislative consideration of a sales and use tax exemption and Tax Bulletin 94-13 which explains the procedure and information required. If you are interested in pursuing legislation during the 1998 General Assembly, the questionnaire should be completed and forwarded to the legislator who will sponsor the bill for exemption. The legislator must sign the questionnaire and submit it to the department by November 1, 1997.
Based on the above, the assessment is correct. A revised bill, with interest accrued to date, will be issued to the Taxpayer as soon as practicable. No additional interest will accrue provided the assessment is paid within 30 days.
Please contact **** in the department's Office of Tax Policy at ********* if you have any questions regarding this letter.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12813I
Rulings of the Tax Commissioner