August 24, 2016
Re: Ruling Request: Retail Sales and Use Tax
House Bill 1191 (Acts of Assembly 2016, Chapter 392)
Dear *****:
This is in response to your request for a ruling on the application of the Retail Sales and Use Tax to sales made in local correctional facility commissaries operated by the Taxpayer *****.
FACTS
The Taxpayer has entered into agreements to operate commissaries in several local correctional facilities. The Taxpayer requests a ruling regarding the new exemption for sales of tangible personal property and prepared meals in local correctional facilities.
RULING
While Virginia law provides an exemption for tangible personal property purchased by the United States, the Commonwealth, and its political subdivisions, there was no exemption for sales by the government in correctional facilities prior to July 1, 2016. Accordingly, all such sales were subject to the tax unless a specific exemption applied. Effective July 1, 2016, House Bill 1191 (Acts of Assembly 2016, Chapter 392) amended Va. Code § 58.1-609.1 to provide an exemption for:
20. Tangible personal property sold by a sheriff at a correctional facility pursuant to § 53.1-127.1 and sales of prepared food within such correctional facility.
In pertinent part, Virginia Code § 53.1-127.1 provides:
Each sheriff who operates a correctional facility is authorized to provide for the establishment and operation of a store or commissary to deal in such articles and services as he deems proper. . ."
As Va. Code § 53.1-127.1 provides the authority for sheriffs to establish and operate commissaries in their local correctional facility, sales of tangible personal property, including prepared meals, in a commissary operated directly by a sheriff qualify for the new exemption. As the section also provides the authority for sheriffs to establish and operate commissaries by contracting with third-party vendors, such as the Taxpayer, sales in such commissaries also qualify for the new exemption.
The authority for commissaries in regional jails is provided by Va. Code § 53.1115.2. The authority for commissaries in state correctional facilities is provided by Va. Code § 53.1-27. As the authority for these commissaries does not come from Va. Code § 53.1-127.1, sales made in these commissaries do not qualify for exemption under Va. Code § 58.1-609.1(20).
I trust this responds to your inquiry. This response is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result. The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions about this determination, you may contact ***** in the Office of Tax Policy, Policy Development Division, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
PD/1-6393309723