Tax Type
Retail Sales and Use Tax
Description
Federal Low Income Housing Tax Credit Program.
Topic
Collection of Tax
Computation of Tax
Exemptions
Date Issued
09-20-1999
September 20, 1999
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****
This will reply to your letter in which you request a ruling regarding the availability of a retail sales and use tax exemption to certain purchases made by your client, ********* (the "Taxpayer").
FACTS
The Taxpayer is a real property construction contractor and has contracted to construct low income rental housing for the elderly. The project is funded by a grant from the United States Department of Housing and Urban Development to the Better Housing Coalition (the "Coalition"). The Coalition, through a related foundation which is exempt from federal income taxation under Internal Revenue Code § 501(c)(3), contracted with the Taxpayer for the construction of the housing units.
The Taxpayer wishes to know if purchases made under its construction contract with the foundation qualify for exemption from Virginia sales and use tax.
RULING
Code of Virginia § 58.1-609.10(8) provides an exemption from the retail sales and use tax for:
-
- tangible personal property purchased for use in the construction of improvements which are to be used solely for affordable rental dwelling units for persons who are of the age of at least 62 years, if at least part of the funds forsite development and the construction are provided by an organization exempt from taxation under § 501(c)(3) of the Internal Revenue Code and if the amount of funds which would otherwise have to be provided by the tax exempt organization is reduced by the amount of the sales and use tax exemption. The rental units shall be considered to be affordable if the rent charged meets the criteria of the Federal Low Income Housing Tax Credit Program.
Based on the information provided to the department, the Taxpayer satisfies the criteria in the exemption. The rent charged for the rental units in this project is affordable as established by the criteria of the Federal Low Income Housing Tax Credit Program. The organization providing the funds for site development and construction is exempt from taxation under Internal Revenue Code § 501(c)(3), and the funds required for this construction project reflect the sales and use tax savings produced by this exemption. In addition, the rental units will be provided to persons who are at least 62 years of age.
The Taxpayer may purchase tangible personal property for use in the performance of this real property contract exempt of the tax. The exemption is also available for construction materials purchased by the Taxpayer's subcontractors for use in performing the real property construction improvements under this contract. The Taxpayer and its subcontractors should present a copy of this letter to the supplier to make purchases of construction materials exempt of the tax. A purchase order or written statement which references the name of the exempt project should be provided with this letter.
If the Taxpayer or any of its subcontractors has already paid the tax on items qualifying for the exemption, a request for refund of the tax should be presented to the supplier accompanied by a copy of this letter. The supplier should refund the tax paid on exempt items and claim a credit for the amount of the refund on its sales and use tax return filed for the month the refund is made.
If you have any questions, please contact ****** of the department's Office of Tax Policy at *****
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/23193S
Rulings of the Tax Commissioner