Tax Type
Retail Sales and Use Tax
Description
Nonprofit organization conducting medical research
Topic
Exemptions
Date Issued
04-20-1990
April 20, 1990
Re: Ruling Request/Sales and Use Tax
Dear**********************
This will reply to your letter of November 13, 1989 on behalf of************* (the Taxpayer), requesting a ruling whether your organization qualifies for exemption from Virginia sales and use tax.
FACTS
******************(the Taxpayer) is a nonprofit organization exempt from income taxation under §501(c)(3) of the Internal Revenue Code. The Taxpayer is organized for the purpose of conducting medical research in conjunction with the Veterans Affairs Medical Center pursuant to 38 U.S.C.A. §4161 et seq..RULING
There is no general exemption from Virginia sales and use tax for nonprofit organizations. See, VR 630-10-74 (copy enclosed). The exemptions from the tax are set out in Va. Code §58.1-608. While the Taxpayer will not qualify for an exemption as a nonprofit organization, it may qualify for the research exemption under Va. Code §58.1-608(3)(e). See also, VR 630-10-92 (copy enclosed). VR 630-10-92(A) provides that "[t]he tax does not apply to tangible personal property purchased or leased and used directly and exclusively in basic research in the experimental or laboratory sense or research and development in the experimental or laboratory sense." (emphasis added).
In order for an item of tangible personal property to qualify for this exemption, the item must be used solely in exempt research activities. Items that are used both in exempt and non-exempt activities in connection with the research are not used exclusively in research activities and are therefore subject to the tax. An example would be a computer that was used by personnel in administrative duties occurring in support of the research. The computer would not be an exempt item because it was not used solely for research. VR 630-10-92 provides an exemplary list of taxable and exempt items used in research activities.
Based on the facts presented, and the above referenced regulations, the Taxpayer in this case qualifies for exemption from the sales and use tax when purchasing items for direct and exclusive use in research. As noted, the exemption is limited in its application and therefore, does not apply to all tangible personal property purchased by the Taxpayer. In order to claim the exemption, the Taxpayer must provide its suppliers with a copy of the enclosed certificate of exemption (Form ST-11). Box number 4 on the form applies to research.
If you have any further questions, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner