90-78 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Nonprofit organization; Must meet all statutory requirements for exemption

Topic

Exemptions

Date Issued

04-20-1990

April 20, 1990

Re: Request for Ruling/Sales and Use Tax

Dear *****************

This will reply to your letter dated February 14, 1990 in which you seek a reconsideration of the department's ruling dated November 20, 1989 regarding the applicability of the sales and use tax to the ****************** (the "Taxpayer").

You maintain that the Taxpayer qualifies for exemption from sales and use taxation pursuant to Virginia Code §58.1-608(8)(k) which provides an exemption for:

- [t]angible personal property purchased for use or consumption by or sold by a nonstock, nonprofit charitable organization, exempt from taxation under §501(c)(3) of the Internal Revenue Code and from local real estate taxation, and which is organized exclusively to foster, sponsor and promote physical education, athletic programs and contests for youths in the Commonwealth. (emphasis added)

In order for an organization to qualify for exemption under this Code section, it must be:

- 1. a nonstock, nonprofit charitable organization exempt from taxation under §501(c)(3) of the Internal Revenue Code;
  2. exempt from local real estate taxation; and
  3. organized exclusively to foster, sponsor and promote physical education, athletic programs and contests for youths in the Commonwealth.

An examination of the information provided confirms that the Taxpayer meets the first two requirements. However, its Constitution reveals that the Taxpayer is organized for many worthy purposes other than, and in addition to its fostering, sponsoring and promoting physical education, athletic programs and contests for youths. Its Constitution provides that the mission of the Taxpayer is "to foster the spiritual, mental and physical development of individuals, families and societies according to the ideals of justice, equality, and mutual respect." It further specifies that it "offers to boys, girls, men and women from all walks of life and economic backgrounds opportunities to grow in mind, body, and spirit" through various experiences. In addition to its organized athletic programs for people of all ages, the Taxpayer is involved in tutoring and values education classes, helping parenting teens, providing child care services, providing special programs for senior citizens, etc.

The Virginia Courts have established the rule of strict construction in the interpretation of statutory exemptions. Thus, taxation is the rule and not the exception and statutory exemptions are construed strictly against the taxpayer, with doubts resolved against granting the exemptions (Commonwealth v. Research Analysis Corp., 214 Va. 161, 198 S.E. 2d 622 (1973)).

Since the Taxpayer is organized for many worthy purposes other than fostering, sponsoring and promoting physical education, athletic programs and contests for youths in the Commonwealth, I find no basis for the exemption claimed in this case. Accordingly, the ruling letter dated November 20, 1989 correctly stated the department's determination of the Taxpayer's tax status.

If you have any further questions regarding this matter, please contact the department.

Sincerely,

W. H. Forst
Tax Commissioner

Rulings of the Tax Commissioner