Tax Type
Corporation Income Tax
Retail Sales and Use Tax
Description
Nonprofit organization
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
04-04-1988
April 4, 1988
Re: Ruling Request: Sales and Use Tax; Corporate Income Tax
Dear*********************
This will reply to your letters of August 27, October 1, October 5, and December 30, 1987, concerning the applicability of the Virginia retail sales and use tax and the state income tax to the Taxpayer. I regret the delay in responding.
Facts
The Taxpayer is a local chapter of a national, nonprofit, educational organization. The Internal Revenue Service has determined that the national organization and the Taxpayer are exempt from federal income tax under I.R.C. §501(c)(6). The Taxpayer seeks exemption from the Virginia retail sales and use tax and the Virginia income tax.
Determination
Sales and Use Tax
All sales of tangible personal property in Virginia are subject to state and local sales taxes unless specifically exempted by law. A complementary use tax is imposed on the use or consumption of tangible property in Virginia. Taxation is the rule and exemptions are strictly construed (Virginia Retail Sales and Use Tax Regulations VR 630-10-35.2). There is no general exemption from the sales or use tax available for nonprofit organizations, and none of the specific exemptions set forth in Va. Code §58.1-608 (copy enclosed) apply to the Taxpayer. Accordingly, the Taxpayer is liable for Virginia state and local sales and use taxes.
Income Tax
Va. Code §58.1-401 and VR 630-3-401 F. exempt from the state income tax nonprofit corporations which are exempt from the federal income tax under I.R.C. §501(c). The Taxpayer is a business league, which is defined as "an association of persons having some common interest, the purpose of which is to promote such common interest and not to engage in a business ordinarily carried on for profit." VR 630-3-302 defines corporations to mean "any Association...or any entity subject to corporation income taxes under the United States Internal Revenue Code." Thus, the Taxpayer is a corporation within the meaning of Virginia law.
The Taxpayer has substantiated its federal exempt status by furnishing the department with a copy of the federal exemption letter. Accordingly, the Taxpayer is exempt from Virginia income tax to the same extent it is exempt from federal income tax. If the Taxpayer has unrelated business taxable income as defined in I.R.C. §512, it must file a Virginia return and pay the Virginia income tax.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner