Tax Type
Retail Sales and Use Tax
Description
Nonprofit hospital providing services to nonhospital entities
Topic
Exemptions
Property Subject to Tax
Date Issued
07-30-1991
July 30, 1991
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear***************
This will reply to your letter of May 24, 1991 in which you seek correction of a recent sales and use tax assessment issued to ***********("Taxpayer").
FACTS
The Taxpayer is a nonprofit hospital and/or a nonprofit hospital corporation, formed as part of a corporate reorganization of to provide services to its nonprofit hospitals. There are incidental services rendered to nonhospital entities but these services also benefit the nonprofit hospitals.
The Taxpayer contests the assessment, contending that the purpose of Va. Code § 58.1-608(A)(7)(1), was to permit the nonprofit hospital sales tax exemption to continue to apply in the context of a corporate reorganization of hospital functions.
DETERMINATION
Va. Code § 58.1-608(A)(7)(1) provides an exemption from the sales and use tax for:
-
- [t]angible personal property purchased for use or consumption by any nonprofit hospital, cooperative or nonprofit corporation organized and operated for the sole purpose of providing services exclusively to nonprofit hospitals. This exemption shall not apply to any nonprofit hospital, cooperative or nonprofit hospital corporation providing services of any kind or to any extent to other than nonprofit hospitals. (Emphasis added.)
The department's policy with respect to exemption from the sales and use tax is dictated by the rule of strict construction established by the Virginia courts. The Virginia Supreme Court has consistently held that "exemption from taxation is the exception, and where there is any doubt, the doubt is resolved against the one claiming exemption." Golden Skillet Corp. v. Commonwealth, 214 Va. 276, 199 S.E.2d 511 (1973).
The wording in the statute was intended to strictly construe this exemption and is clarified further in the second sentence which specifies that the exemption does not apply when services of any kind or to any extent are provided to other than nonprofit hospitals. The Taxpayer, as a result of the corporate reorganization, provides services to nonprofit hospitals as well as incidental services to nonhospital entities. The rendering of these incidental services serve to deny the exemption. This issue was addressed in P.D. 87-204 (3/26/87), of which I have enclosed a copy.
Thus, I find no basis for the revision of the instant assessment. A revised notice of assessment will be sent to the Taxpayer under separate cover, which should be paid within 30 days to avoid the accrual of additional interest.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner