Tax Type
Retail Sales and Use Tax
Description
Direct billing of patients by Nonprofit corporation
Topic
Taxability of Persons and Transactions
Date Issued
12-19-1990
December 19, 1990
Dear ****
This will reply to your letter of February 26, 1990, in which you seek correction of two recent sales and use tax assessments issued to the * * * (the "Taxpayer").
FACTS
The Taxpayer is a nonprofit corporation providing magnetic resonance imaging services to patients on an inpatient and outpatient basis. The members of the corporation are two nonprofit hospitals. For administrative convenience, the Taxpayer bills outpatient services to the patient directly. An audit of the Taxpayer for the period October 1, 1986, through September 30, 1989, produced assessments for its failure to remit the sales and use tax on various purchases of tangible personal property.
The Taxpayer contests the assessments, contending that its purchases are exempt under Va. Code § 58.1-608(7)(d) and that its patient billing procedures would not serve to deny the exemption.
DETERMINATION
Please find enclosed copies of two rulings issued by the Department, P.D. 87-204 (8/26/87) and P.D. 87-291 (12/10/87), dealing with issues similar to those raised in your letter.
As set forth in the rulings cited above, the exemption provided by Va. Code § 58.1-608(7)(d) requires the provision of services exclusively to nonprofit hospitals. The statute specifically provides that the exemption does not apply when a corporation provides services of any kind or to any extent to other than nonprofit hospitals. The Department found that when a nonprofit cooperative or nonprofit hospital corporation provided services on an outpatient basis for which the patients would be billed directly, the cooperative or corporation was not deemed to be providing services exclusively to nonprofit hospitals as required for exemption under the above statute. Thus, the exemption was inapplicable in such instances.
Similarly, in the instant case the Taxpayer billed the patients directly rather than making billings for the magnetic resonance services directly to the nonprofit hospitals. Moreover, it is my understanding that the Taxpayer also provided services to hospitals which are conducted for profit. Therefore, based on all of the foregoing and the doctrine of strict construction as referenced in the above rulings, the exemption would not apply to the Taxpayer.
Accordingly, I do not find basis for relief in this case. Updated notices of assessment will be issued as soon as practicable.
Sincerely
W. H. Forst
Tax Commissioner
Dear ****
This will reply to your letter of February 26, 1990, in which you seek correction of two recent sales and use tax assessments issued to the * * * (the "Taxpayer").
FACTS
The Taxpayer is a nonprofit corporation providing magnetic resonance imaging services to patients on an inpatient and outpatient basis. The members of the corporation are two nonprofit hospitals. For administrative convenience, the Taxpayer bills outpatient services to the patient directly. An audit of the Taxpayer for the period October 1, 1986, through September 30, 1989, produced assessments for its failure to remit the sales and use tax on various purchases of tangible personal property.
The Taxpayer contests the assessments, contending that its purchases are exempt under Va. Code § 58.1-608(7)(d) and that its patient billing procedures would not serve to deny the exemption.
DETERMINATION
Please find enclosed copies of two rulings issued by the Department, P.D. 87-204 (8/26/87) and P.D. 87-291 (12/10/87), dealing with issues similar to those raised in your letter.
As set forth in the rulings cited above, the exemption provided by Va. Code § 58.1-608(7)(d) requires the provision of services exclusively to nonprofit hospitals. The statute specifically provides that the exemption does not apply when a corporation provides services of any kind or to any extent to other than nonprofit hospitals. The Department found that when a nonprofit cooperative or nonprofit hospital corporation provided services on an outpatient basis for which the patients would be billed directly, the cooperative or corporation was not deemed to be providing services exclusively to nonprofit hospitals as required for exemption under the above statute. Thus, the exemption was inapplicable in such instances.
Similarly, in the instant case the Taxpayer billed the patients directly rather than making billings for the magnetic resonance services directly to the nonprofit hospitals. Moreover, it is my understanding that the Taxpayer also provided services to hospitals which are conducted for profit. Therefore, based on all of the foregoing and the doctrine of strict construction as referenced in the above rulings, the exemption would not apply to the Taxpayer.
Accordingly, I do not find basis for relief in this case. Updated notices of assessment will be issued as soon as practicable.
Sincerely
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner