Tax Type
Retail Sales and Use Tax
Description
Government contractor operating a visitors center for the Federal government
Topic
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
07-31-1986
July 31, 1986
Re: Request for Ruling/Sales and Use Tax
Dear ****************
This will reply to your letter of June 13, 1986, in which you request a ruling on the applicability of certain sales and use tax exemptions to purchases of tangible personal property by your corporation.
FACTS
**************** (Taxpayer) is engaged in the operation of the visitor center at a federal facility located in Virginia and as such functions as a contractor of the United States government. The visitor center presents information to the general public in the nature of exhibits, video tape programs, and lecture programs. In particular, the information presented at the visitor center is geared toward school groups. In addition, the visitor center provides various outreach programs, including a telelecture series and travelling exhibit programs. The telelecture series is specifically designed to permit schools across the nation to take advantage of lecture programs by means of a slide show and a two-way telephone and loud speaker connection. Although the taxpayer is apparently a corporation conducted for profit, no charges are made to the public for viewing the visitor center or partaking in any of its programs.
The taxpayer requests a ruling on the applicability of the sales and use tax exemption for nonprofit institutions of learning and certain nonprofit museums of fine arts to its purchases of tangible personal property. In the event that rush exemptions are found not to apply to the taxpayer, a ruling is also requested on the applicability of the tax to exhibits used in visitor center programs. Such exhibits are normally produced to the taxpayer's exact specifications and included in the charge for the exhibits are expense for concept, design, fabrication, transportation, and installation.
RULING
While all nonprofit organizations do not enjoy an exemption from the sales and use tax, certain specific types of nonprofit organizations have been granted exemptions by the General Assembly. Among the specific exemptions for nonprofit organizations set forth in Section 58.1-608 of the Code of Virginia are ones for "[t]angible personal property for use or consumption by a college or other institution of learning...provided such college...is not conducted for profit," and "tangible personal property purchased for use or consumption by a nonprofit museum of fine arts which is located on property owned by a city in Virginia and which receives more than half of its operating budget from appropriations by the city."
In determining whether the taxpayer qualifies for either of the above exemptions, it first must be determined whether the taxpayer is a nonprofit organization. If so, then it must be determined whether the taxpayer meets the criteria set forth in the exemption statutes and departmental regulations.
Based upon the information before me, I see no evidence that the taxpayer is a nonprofit organization. Although no visitor center admission or program charges are made to the public, the taxpayer's cost plus fixed fee contract with the federal government guarantees the taxpayer a measure of profit from its operation of the federal facility. Therefore, it must be assumed that the taxpayer is not organized as a nonprofit corporation and that none of the specific statutory exemptions for nonprofit organizations applies to its operations.
Even if the first test was met in this case, I cannot conclude that the taxpayer's operations would meet the criteria for exemption set forth in the law and departmental regulations. With regard to the exemption for colleges and other institutions of learning, Section 630-10-96 of the Virginia Retail Sales and Use Tax Regulations sets forth the following criteria for exemption:
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- An "other institution of learning" must be similar to a college, that is, it must (a) employ a professionally trained faculty; (b) enroll and graduate students on the basis of academic achievement; (c) prescribe courses of study: and (d) provide instruction at regular intervals over a reasonable period of time.
- An "other institution of learning" must be similar to a college, that is, it must (a) employ a professionally trained faculty; (b) enroll and graduate students on the basis of academic achievement; (c) prescribe courses of study: and (d) provide instruction at regular intervals over a reasonable period of time.
With respect to the exemption for certain nonprofit museums of fine arts, the taxpayer does not meet the specific statutory criteria of being "located on property owned by a city in Virginia" and receiving "more than half of its operating budget from appropriations by the city." Furthermore, it is not apparent that the visitor center in question can be considered a "museum of fine arts." Under the rule of strict construction adhered to by the Virginia courts with respect to tax exemptions, it must therefore be determined that this exemption would also be inapplicable, even if the taxpayer in this case was a nonprofit organization.
Lastly, I will address the application of the tax to exhibits purchased by the taxpayer. As these exhibits constitute tangible personal property, they are subject to the sales and use tax under the provisions of Virginia Code Sections 58.1-603 and 58.1-604. When purchasing an exhibit, the tax applies to tho "sales price" of the exhibit. "Sales price" is defined in Virginia Code Section 58.1-602.17 as "the total amount for which tangible personal property or services are sold, including any services that are a part of the sale... without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expenses whatsoever." Therefore, the tax will apply to the total charge for an exhibit, except that Virginia Code Section 58.1-602.17 sets forth exceptions to this rule for separately stated installation charges and separately stated charges from the seller for delivering tangible personal property to the customer. In applying this concept to the taxpayer's purchase of exhibits, charges for installation and transportation would be nontaxable when separately listed on purchase invoices: however, the tax would due on the remainder of the purchase price, including any charges for concept, design, and fabrication.
I trust that this will answer the questions posed in your letter. If you have any further questions, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner