Tax Type
Retail Sales and Use Tax
Description
Government purchases for third party
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
07-09-1990
July 9, 1990
Re: Request for Ruling/Sales and Use Tax
Dear ****
This will reply to your letter of May 29, 1990 in which you request a ruling as to the sales and use tax application of tangible personal property purchased by your organization (the Government), for use by nongovernmental entities (Clients).
In the situation outlined in your letter, the Government makes purchases for Clients both by official purchase order and authorizations. In both situations, the tangible personal property is paid for with public funds.
Virginia Regulation 630-10-45 states that the "tax does not apply to sales to the Commonwealth of Virginia or to its political subdivisions, if the purchases are pursuant to required official purchase orders to be paid for out of public funds." However, Virginia Code §58.1-608(1)(e) provides a sales and use tax exemption for "tangible personal property for use and consumption by the Commonwealth, any political subdivision of the Commonwealth, or the United States." Thus, in order for items to be exempt, they must be purchased pursuant to an official purchase order, paid for with public funds and for use and consumption by a governmental entity (see enclosed opinion of the Attorney General). Unless the items meet the three criteria outlined above, they will be subject to the tax. In this case, the Government's purchases are subject to the tax as the items are not for the use or consumption of the Government. The same reasoning is applicable to the use tax for items purchased outside the state.
If you should have any further questions, please feel free to contact me.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner