Tax Type
Retail Sales and Use Tax
Description
Meals and hotel accommodations purchased by state employees or nonprofit organizations
Topic
Taxability of Persons and Transactions
Date Issued
05-27-1988
May 27, 1988
Re: Request for Ruling/Sales and Use Tax - State Government Employees and Nonprofit organizations.
Dear**************
This is in reference to your letter of April 13, 1988, in which you requested a ruling on the application of the sales and use tax to meals and lodging sold to employees of the Commonwealth and nonprofit organizations.
FACTS
************** ("The Taxpayer") owns and operates several hotels in the Commonwealth and has rented rooms and sold meals to employees of the Commonwealth and nonprofit organizations who have claimed tax exempt status. You request a ruling as to whether purchases of meals and lodging by these persons are exempt from the sales and use tax.
RULING
§630-10-45 of the Retail Sales and Use Tax Regulations states that "[n]o exemption is provided for state or local government employee purchases of meals or lodging whether purchases are pursuant to required official purchase orders or not."
This regulation is supported by an opinion of the Attorney General, (OAG), dated May 14, 1970, (copy enclosed), which addressed the application of the sales and use tax to charges for meals purchased by the Commonwealth. The OAG held that the Commonwealth could not use a sales tax exemption certificate when purchasing food to be consumed by individuals.
Therefore, the purchases of meals and lodging by state or local government employees, even when billed to or paid for by the government, are not exempt from sales and use tax.
There are two exceptions to the general rule of taxability for meals and lodging. An exemption is allowed for purchases by federal government employees but only if payment is made by direct billing, credit card, or a prearranged contract. Regulation §630-10-45. Also, certain nonprofit educational institutions as defined in Virginia Code §58-1-608(25), are exempt from the sales and use tax on meals and lodging. Under this exception, these institutions must regularly admit high school students or college students and either provide an educational experience in American Government or give credit towards an undergraduate or graduate level college degree. As with the federal government employee exemption, the charge must be paid directly by the nonprofit educational institution.
The Department of Taxation does not compile a listing of organizations that are entitled to the exemption but generally only the exceptions noted above will qualify. However, all exempt sales must be verified by a properly executed certificate of exemption. The retailer should also maintain a record of all' billings and receipts of transactions in which no sales tax was charged.
If you have any further questions regarding this matter, please do not hesitate to contact me.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner