Tax Type
Retail Sales and Use Tax
Description
Fund raising sales to school organizations
Topic
Taxability of Persons and Transactions
Date Issued
11-03-1986
November 3, 1986
Re: Request for Ruling/Sales and Use Tax
Dear ********************
This will refer to your letter of May 29, 1986, in which you request a ruling on the application of a recent law change to your business, and to your recent meeting with representatives of the department's Tax Policy Division.
As noted in your letter, your business is engaged in the sale of fund raising materials to schools, churches, and civic organizations. You are specifically interested in how the provisions of House Bill 149, enacted by the 1986 session of the General Assembly and signed into law by the Governor, will impact your business.
House Bill 149 added, effective July 1, 1986, an additional sales and use tax exemption to § 58.1-608 of the Code of Virginia for the following items:
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- Tangible personal property purchased for use, consumption, or sale at retail by a Parent Teacher Association or other group associated with an elementary or secondary school conducted not for profit for use in fund-raising activities, the net proceeds (gross receipts less direct expenses) of which are contributed directly t the school or used to purchase certified school equipment; and certified school equipment purchased by such groups for contribution directly to the school. For the purposes of this paragraph, "certified school equipment" shall mean that equipment for which the Parent Teacher Association or other group has received certification from the school that it will accept a donation of the equipment. The certification provided by the school shall be in accordance with regulations promulgated by the Tax Commissioner.
Under the above statute, a sale to a PTA or other school organization (including student clubs and organizations) for fund-raising purposes will be exempt only if the following conditions are met: (1) the organization must be affiliated with a nonprofit elementary or secondary school, (2) the property purchased must be used in fund-raising activities on behalf of the school, and (3) the net proceeds from the fund-raising activities must be contributed directly to the school or used to purchase certified school equipment.
The provisions of House Bill 149 will also apply to purchases made by schools themselves. Thus, a nonprofit elementary or secondary school (including band directors, choir directors, teachers, principals, etc., acting on behalf of the school or a school organization) may purchase exclusive of the tax any items that will be used in qualifying fund-raising activities. As with organizations affiliated with schools, the net proceeds of the fund-raising sales must be retained by the school or used to purchase certified school equipment.
In your recent meeting with departmental representatives, you specifically asked about the applicability of the new exemption when the net proceeds of a fund-raiser are placed in an elementary or secondary school's general fund. In such an instance, I must conclude that the exemption is available as the net proceeds go to the school itself. The exemption would also apply even though some or all of the proceeds are earmarked within the school's general fund for certain organizations or activities.
To make an exempt purchase from your business under this new exemption, a school or organization will need to furnish you an exemption certificate, Form ST-13. As explained in Virginia Regulation 630-10-20 (copy enclosed), the acceptance in good faith of a completed exemption certificate by the seller relieves him of his obligation to collect the tax. However, if a school or organization does not furnish you with a Form ST-13, you will be required to collect the tax on the sale.
Also addressed in your recent meeting was the possibility of requiring a letter or form from the school principal when the school or a school organization conducts a fund-raiser for the purchase of certified school equipment. After reviewing the circumstances, however, it will not be necessary for your business to obtain such a letter or form when you merely sell fund-raising materials to a school or a school organization. The only instance in which such a letter or form would be needed is when a business actually sells certified equipment to a school or school organization.
The general rules set forth above apply whether your business is dealing with a public or private elementary school or secondary school.
House Bill 149 does not apply to nonprofit organizations that are not affiliated with elementary or secondary schools, such as Little Leagues, the Boy Scouts and Girl Scouts, the Lions, the Rotary, etc. Therefore, purchases of fund-raising materials by those groups will always be subject to the sales tax, unless you are presented with a valid resale exemption certificate. A valid certificate is one that bears the organization's sales tax registration number.
I trust that this will answer all of the questions posed in your letter. If any further questions arise, please do not hesitate to contact the department. As noted in your recent meeting, the department is now in the process of revising its sales and use tax regulations to reflect the provisions of House Bill 149; thus, we would be most appreciative of any further comments that you might have on the new exemption.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner